In what is turning out to fully fledged, politically driven market, the euro continued to be sensitive to all the developments coming out of France. Yesterday, the Euro slumped sharply in the European session with news that former Prime Minister Juppe has ruled himself out of the presidential race. This was interpreted by investors as a potential Euro disaster because it potentially gave Len Pen the upper hand in the race for the presidency. As you might know now, Len Pen is against the Euro Banker money and has vowed to pull France out of the single currency bloc in case she wins. The USD on the other hand continued to strengthen after Yellen’s comments last week in which she said that hiking rate in next week FOMC meeting was the most appropriate thing to do if the economy continues to expand and be in sync with FED’s expectations. So far, investors have priced an 85% probability of a rate hike up from 25% early Feb. As a matter of fact, average earnings is expected to rise with unemployment ticking lower at 4.7% for February Jobs report. In the case of this eventuality, the USD will rally. In other news, today the RBA decided to keep interest rates unchanged and hinted for no further easing. AUD rallied with this news late in the Asian session but has since cleared the Pre-OCR release lows. RBA said business confidence is above average with consumer expenditure expected to growing despite being low at the moment.
Technically, I will look to buy the NZD and sell the Euro and USD. I will specifically zero in on the Euro Kiwi pair and sell because of the political uncertainty and the strengthening commodity currency. The daily chart is oversold and yesterday a whole candle closed above the upper BB. This means price is overextended. The stochastics are also overbought and there is a likelihood of price trending lower. In the 1HR chart, there are two signals that are indicating a pullback. First, there is a sell signal printed by an overbought stochastics then there is a reduction in open interest as OBV continues to reduce in volume. Then the inherent price action pattern because of a double bar formation coupled with the sell signal printed.
Fundamentals to watch out today include the New Zealand Global Dairy Index at a tentative time. Usually an hour or so after NY open. If it turns out positive, then continue buying the NZD.
Trading will be as follows:
Sell Stop: 1.5100
Stop Loss: 1.5180
Take Profit: 1.4920
Have a good trading day.
NB: This trade is still valid, wait for a trigger and shift your stop loss