NZD/USD: Are you preparing yourself to profit from today's NZD & AUD fundamental?
A lot of pressure is on NZDUSD and AUDUSD today. New Zealand's Gross Domestic Product (QoQ figures) are expected to come out today at 9:45 pm London Time, while Australia’s Employment Change is scheduled to be disclosed at midnight.
Due to some technicals reasons, I will be highlighting in the following paragraphs, a “risk-off” scenario is very probable. Kiwi will be heavily affected if Quarter GDP comes below 0.5%, the same case applies to Aussie if employment data does not meet expectations. According to estimates, NZD Gross Domestic Product is expected to come at 0.6% (previous being 0.5%). On the other hand, AUD Employment Change is projected to come at 14.0K (previous being -19.0K).
Even though numbers are optimistic, the downside scenario remains solid as the Reserve Bank of Australia has signalled a possible cut at the beginning of next year. Another important factor is the US-China deal being the “surprise factor” in this game. Both, Aussie and Kiwi have been heavily affected by negative outcomes out of the negotiation process. A 0.1% increase in NZD GDP would slightly meet expectations, and anything significantly below will send a clear message: the latest cuts from the New Zealand Central Bank (NZCB) have not been very effective to stimulate the economy. On the contrary, a better than expected figure will signal that the rate cuts are indeed working.
On the technical side, there is also a lot going on. Kiwi has been without a doubt, the best-performing currency in the Asian region during Q4. This being said, sentiment and momentum indicators are showing that the currency is already in overbought territory. The previous statement aligns with NZDUSD’s current price action.
The last weekly candle closed below the 0.66500 liquidity level, which shows that bears are starting to reject the resistance. A Fibonacci drawn in 1W shows that price action is currently at the golden ratio of the indicator, thus, a correction from this point is the best retracement possible. In the daily timeframe, exhaustion is also evident. During the last three days, NZDUSD has lost over 70 pips, with the wicks of the candles already showing some weakness.
I highly recommend traders to carefully monitor price action before and after tonight. I do believe both pairs, NZDUSD and AUDUSD can move more than 60 pips due to the upcoming fundamentals. Also, bear in mind that the Dollar Index has also bounced from an important weekly and monthly support, which explains why the USD has climbed modestly in the last few days. If the performance of the greenback continues as it goes, then we can expect further downside momentum for Asian currencies.