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NZD/USD Fails at 2016 High Ahead of Labor Report- Bearish Sub 7025

NZD/USD Fails at 2016 High Ahead of Labor Report- Bearish Sub 7025

Talking Points

  • NZD/USD fails at 2016 high- Outside reversal candle in progress
  • Bearish sub-7025 ahead of New Zealand Labor Report
  • Updated targets & invalidation levels

NZDUSD 30min

Chart Created Using FXCM Marketscope 2.0

Technical Outlook: Kiwi has reversed sharply at the April high with a break back below the weekly open looking to post an outside day reversal candle. A proposed pitchfork the highs keeps the focus weighted to the short-side ahead of tonight’s New Zealand labor report.

The pair is now testing interim support at 6923 with interim resistance seen at the 50-line (red) / the weekly open at 6974 & 7006. Our near-term bearish invalidation level is set at the median-line confluence just higher at 7025.

We’ll be looking to sell rallies / short-triggers heading into the release with a break lower targeting subsequent support targets at the 61.8% retracement at 6900, the median-line off the highs / 6864/66 backed closely by the October high-day close at 6850. A break below this threshold is needed to mark a larger scale reversal targeting 6806 & 6782.

Keep in mind that although consensus estimates are calling for an up-tick in the headline unemployment rate, the move is expected to be accompanied by a broadening in the labor force participation rate (which typically puts artificial upward pressure on the headline figure). That said, we’ll also want to pay close attention to the wage growth data with average hourly earnings expected to rise by 0.5% in the 1Q, up from 0.2% q/q.

From a trading standpoint I would be looking for a rebound back towards the weekly open for short-entries on the release. Continue tracking this setup and more throughout the week- Subscribe to SB Trade Desk and take advantage of the DailyFX New Subscriber Discount!

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  • A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders remain net short the Kiwi - the ratio stands at -1.22 (45% of traders are long- up from 39% previous day)- weak reading
  • Open interest is 13.0% higher than yesterday and 9.7% below its monthly average.
  • The recent decrease in long position suggests the immediate risk for a rebound although a broader flip to net long would reinforce the notion of a reversal lower.

Why and how do we use the SSI in trading? View our video and download the free indicator here

Relevant Data Releases This Week

Other Setups in Play:

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---Written by Michael Boutros, Currency Strategist with DailyFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.