Nothing much today but all focus will be on the Loonie and Governor Poloz speech later in the day. Of course we have that sweeping arrest in Saudi Arabia and the congratulatory tweet by President Trump. It’s a minor event and the market didn’t react at it in any way. Anyways, we still have to look at probable headwinds of Tax Reforms which is increasingly looking like it will be delayed. As predicted, Democrats are against these reforms and argue that before backing corporate rate slash they would like to see affirmative action by President Trump especially with further tax cuts to the middle class. Again, not all republicans are supporting this bill. If it shall not pass before the end of the year, then it would be a blow the USD. In the mean time, the USD is fairly firm after last week’s NFP and strong ISM non-Manufacturing activity. Canada on the other hand recorded stellar job growth with the economy producing 35.3K jobs against 15.3K even though the BoC has indicated that it has no plans of raising interest rates in the near future.
The Kiwi gained last night after minutes of meeting quoted the acting RBNZ chair Grant Robertson elaborating the new focus of the RBNZ. As explained earlier, the new coalition government aim is to boost economic growth. One way of doing so is by strengthening the labor market through stellar job creation and gradual increase of minimum wage. According to Grant, going forward the bank has no intention of FX intervention. This can be interpreted as a quite dovish because now just like the FED, labor market should heat up before any rate hike happens. That will take time and the current OCR will likely stay at these levels for an extended period of time.
Technically, I expect the NZD to chart its way up. Keeping it simple, momentum indicators show that prices are overextended to the downside and after a 10% gain against the Kiwi, CAD should cede some ground. In the weekly chart we can see that price action bullish divergence relative to stochastics. With higher highs relative to lower BB and a buy signal to shore NZD bulls, a buy stop in lower time frame should be a way forward.
To do that, we shall enter our trade in the daily chart. The main resistance trend line connects July 28 and October 16 highs. For bullish scenario, I will set a buy stop at 0.893 which is November 1 highs. Notice that there is a double bottom at 0.88 and should our trigger at 0.893 broken then price action shows that the next stop of the resulting W-Formation will be at 0.94 to the upside. That will be our ideal bull take profit.
Trading will be as follows:
Buy Stop: 0.893
Stop Loss: 0.88
Take Profit: 0.92-0.94 range
Have a good trading day.