Trade view /
05 October 2016 at 1:10 GMT
The Reserve Bank of New Zealand desperately wants the Kiwi dollar to decline, thereby importing enough inflation to give it a chance of reaching the 2% inflation target. Frustratingly for it, NZDUSD has held up due to (1) a 2%+ money market rates (2) improving commodity prices and (3) risk appetite in global markets.
There are signs all three could turn in the RBNZ’s favour. A rate cut at its next meeting on November 10 is highly likely; dairy prices fell in yesterday’s auction and a sudden switch to risk-off trading could be triggered by any number of events (including a Donald Trump revival).
There is no economic data of note due out in New Zealand this week so Friday’s US jobs report will be the flash point for any NZDUSD move. Expectations centre around 170,000 jobs added and perhaps a small decline in the unemployment rate. But, as usual, its a crapshoot.
Management and risk description
From an Elliott Wave perspective, the Kiwi is still interpreted to have completed a complex “Double Three” corrective structure on last month’s 0.7485 high, with downside potential toward the 0.6985/0.6950 area (refer daily chart below). Resistance now lies at 0.7200/0.7230 to yield the next selloff toward 0.7090/0.7060.
Entry: NZDUSD is seen as a sell today around the 0.7220 level.
Stop: 0.7243, initially.
Time horizon: allow a few days.
NZDUSD daily chart (click to expand)
NZDUSD weekly chart (click to expand)
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– Edited by Gayle Bryant