Kiwi Hangs By A Thread Above 0.7710

Technical Sentiment: Bearish

Key Takeaways

• ISM Manufacturing PMI about to be released during 3^rd/11 U.S. trading session;
• S. Trade Balance due on Tuesday (consensus at -40.0B vs. -40.1B);
• Slightly bullish expectations for New Zealand Dollar on Tuesday, based on Employment Change and Unemployment Rate, but Global Dairy Trade could surprise negatively again;
• NZD/USD quickly approaching a major support level at 0.7710.

Traders drove NZD/USD slightly lower in intraday trading on Monday, with a major target at 0.7710 about to be tested shortly.

Technical Analysis

NZD/USD started the week on a bearish note, with USD gaining against the Kiwi in accordance with the trend set during the second half of October. Price action is pursuing a fresh Lower Low at the moment, within a bearish swing configuration, with 0.7700/10 representing a viable target during the next couple of trading sessions.

Spot is currently trading around 0.7755, slowing down as traders quietly wait for Final Manufacturing PMI and ISM Manufacturing PMI to be released. Despite oversold conditions on 4H and Daily, NZD/USD hangs by a thread above 0.7710 and is likely to break below, paving the way for more losses towards 0.7430/60, where a multi-year support level (coupled with 50% Fibonacci Retracement from 0.6560 up to 0.8835) will represent a major cross-road in the long-term technical landscape.

While NZD/USD maintains a configuration of Lower Highs and Lower Lows, going long blind, without any bullish patterns, should be avoided by all means. Even a bounce off 0.7710 could lead to a temporary rally back up to 0.7770 before the downtrend resumes, consequently potential buyers near 0.7710 should be trigger happy to book profits on their positions.

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Prepared by Alex, Currency Strategist at Capital Trust Markets