NZD/USD Breakout or Fake-out? NZ Employment to Offer Cues

2017-01-31 18:04:00

Talking Points

NZDUSD breakout vulnerable to NZ jobs report- Constructive above 7235
Updated targets & invalidation levels
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NZD/USD 240min

Technical Outlook: Last week we discussed the significance of the 7292/93 resistance zone with the long-bias vulnerable while below this region.Kiwi broke above this threshold today in European trade with the rally responding to a key near-term resistance confluence at 7350/52- a region defined by the upper median-line parallel & the 78.6% retracement of decline off the 2016 high.

A close above 7300 is needed to keep the long-bias in focus with our bullish invalidation level set to the highlighted confluence support zone around 7235(weekly opening range low, 23.6% retracement & slope support). A breach higher targets longer-term slope resistance 7380 & 7400. More significant resistance is eyed at the 2016 high-day close at 7450.

Bottom line, heading into tonight’s New Zealand employment report, the broader risk remains weighted to the topside while within this formation, but don’t rule out a test of structural support before heading higher. From a trading standpoint, I would be interested in fading a spike higher into 7400 OR fading weakness into the lower parallels, targeting a new high.

A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are short NZD/USD - the ratio stands at -2.31 (30% of traders are long)- bullish reading
Long positions are 14.3% lower than yesterday and 10.8% below levels seen last week
Short positions are 9.1% higher than yesterday and 20.1% above levels seen last week
Open interest is 0.8% higher than yesterday and 13.7% above its monthly average
The current dynamic of increasing short positioning alongside building open interest continues to point higher in Kiwi. Note that SSI hit an extreme of -3.32 in September as the pair topped- Look for a continued build in shorts in the coming days to further validate our near-term directional bias.

Relevant Data Releases