So, the USD bulls are back after the very strong US NFP data that not only signal reversal from major technical positions but also fed into the strong hawk calls for a rate hike. For once, we saw average hourly earnings rise to 0.3% against the expected 0.2% and most importantly, the rise of participation rate meaning not only is the economy churning out more jobs but they are also earning more. This kind of data is really important if the 2% inflation rate is to be achieved and I anticipate inflation to rise and even more industrial and service sectors to improve in performance in the coming months. For commodity currency in particular-AUD and NZD in this case, we shall expect more dovish calls. There is growing consensus that the RBNZ will cut rates by 25bps this coming Thursday and we expect price action to trend lower back to the support level below 0.7 even though weekly COT were kind off unchanged for NZD bets-in fact it increased by 2 contracts as last week closed.
Pardon my charts, I’m not near my trading desk today, I expect price action to trend lower today-we already saw that in the Asian session price trending lower but as the European session open, price shall recover and our plan for today will be to short at all those highs. Since there are no major fundamentals this week other than retail sales for both economies coming in on Thursday and Friday and RBNZ rate Announcement coming in on Thursday, there will be nothing major to watch.
So, this is our trading plan for today:
Sell Limit: 0.715-0.716 which is a zone in between Friday’s Fibonacci 50-61.8 retracement levels.
TP: set this at a ratio of 1:2 or 3 Risk reward ratio
Otherwise, have a wonderful trading day.