Risky assets, and most notably, the commodity currencies, the Australian Dollar, the Canadian Dollar, and the New Zealand Dollar, fell against the safe haven currencies in the overnight session as markets consolidated ahead of the U.S. nonfarm payrolls report, in which the world’s largest economy is expected to have added 165K jobs in May. Nonetheless, all bets could be off if the actual data reading misses consensus – to the upside or the downside.
Fundamental Headlines
• Italy’s Credit Downgrade Unlikely: UBS - Bloomberg
• U.K. Banks Cut 103,000 Jobs Since 2008 - Bloomberg
• US Jobs Growth Could Signal Worrisome Slowdown - CNBC
• Moody’s Threatens U.S. Debt Rating Cut - WSJ
• SEC Probes China Auditors - WSJ
NZDJPY: The Kiwi-Yen pair, a strong barometer of risk appetite in the currency markets, fell by 0.72 percent in the overnight, as traders continued to pare their gains off of the Kiwi’s remarkable run ahead of the U.S. nonfarm payrolls report. Neither country had data due in the overnight, so much of the action in the pair comes on sentiment that the major data release could disappoint traders. The Kiwi has gained over 9.6 percent over the past three months; the Yen has been one of the stronger performers since the start of May, in conjunction with the Swiss Franc. The rally may not be over, should the NFP report fall short of expectations.
Taking a look at price action, a disappointing nonfarm payrolls number would fit neatly in with the technical picture, which suggests that the NZD/JPY pair is at extreme levels and is due for a pull back. The daily RSI is at 54, and falling, while the MACD Histogram appears to have peaked at its bullish divergence, with the differential narrowing, back to 9. Similarly, the Slow Stochastic oscillator is trending lower, suggesting a sell signal, with the %K lower than the %D at 68 and 80, respectively. A short trade is predicated on the notion of a lower NFP reading, but the technical picture agrees that the Kiwi-Yen should fall lower despite its losses the past few days.
Written by Christopher Vecchio, Currency Analyst
To contact the author of this report, please send inquiries to: cvecchio@dailyfx.com
Follow Christopher Vecchio on Twitter: @CVecchioFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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