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NZD/USD Downside Targets Remain Favored on Bearish Formation

NZD/USD Downside Targets Remain Favored on Bearish Formation

David Song, Strategist

Talking Points:

- NZD/USD Retail Crowd Remains Net-Long Despite Bearish Formation.

- USD/CAD Topside Targets Favored as Pair Clears June High (1.2562).

- USDOLLAR Triangle/Wedge Formation in Focus Going Into Non-Farm Payrolls (NFP) Report.

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NZD/USD

NZD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • NZD/USD remains at risk for a further decline as price & RSI retain the bearish formations; keeping a close eye at channel support along with the Fibonacci overlap coming in around 0.6690 (161.8% expansion) to 0.6710 (78.6% expansion).
  • Despite expectations for a back-to-back rate cut at the Reserve Bank of New Zealand’s (RBNZ) July 22 meeting, the forward-guidance for monetary policy is likely to have a larger impact on NZD/USD as market participants speculation the duration of the fresh easing cycle.
  • DailyFX Speculative Sentiment Index (SSI) shows retail traders remain net-long NZD/USD since May 19, with the ratio still holding near extremes as it sits at +3.17.

USD/CAD

USD/CAD Daily Chart
  • USD/CAD appears to be resuming the long-term bullish trend as it clears the May high (1.2562) and breaks out of the triangle/wedge formation carried over from March; looking for a closing price above 1.2540-50 (23.6% retracement) for conviction/confirmation.
  • Will continue to watch the relationship between oil & the Canadian dollar, while the Bank of Canada (BoC) may largely endorse a wait-and-see approach throughout 2015 amid the ongoing mixed batch of data coming out of the economy.
  • Next topside region of interest comes in around 1.2620 (50% retracement) to 1.2640 (78.6% retracement).

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Read More:

Price & Time: USDOLLAR Clear As Mud

USD/CAD on Cusp of Breakout as EUR/USD Retreats

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11902.5411908.0211849.960.3989.33%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the bullish reaction in the Dow Jones-FXCM U.S. Dollar to the better-than-expected ADP Employment & ISM Manufacturing survey, the greenback may continue to consolidate in the days ahead as it remains stuck in the triangle/wedge formation from April.
  • Even though market participants anticipate another 230K expansion in U.S. Non-Farm Payrolls (NFP) along with a downtick in the jobless rate, may need a very strong employment report to spur a breaking in the USDOLLAR as market participants continue to mull the Fed liftoff.
  • Lack of momentum to close above near-term resistance around 11,898 (50% retracement) to 11,901 (78.6% expansion) may continue to produce range-bound prices going into the first full-week of July.

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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