Strong Technicals Look To Compensate For Fundamental Risk In NZDUSD Range

Daily Forex Technicals | Written by DailyFX | Feb 12 09 01:39 GMT |

Why Would NZDUSD Hold a Range? Levels to Watch: Range Top: 0.5355 (Fib, Pivot) Range Bottom: 0.5180 (Trend, Fib, Pivot, SMA) Risk trends are the primary fundamental concern for nearly every pair in the currency market. As the balance between risk and return settles once again into skepticism and losses, we can see that burgeoning trend bull trend in the yen crosses and com bloc are coming under pressure. However, with few events that can generate a market wide shift in sentiment on the docket, major levels could hold. Volatility from regular indicators is still a threat. NZDUSD is still recovering from a temporary plunge to new multi-year lows through the past week. And, while recent momentum has favored the bullish reversal, we should not ignore the fact that the dominant trend is still with the bears. Through the short-term though, there is a notable selection of support that can hold up trend and range. Suggested Strategy Long: Entry orders will be placed at 0.5220 to account for the rising trendline. Stop: An initial stop at 0.5160 is not far below hard support, but should cover the short trend. To secure profit, move the stop on the second lot to breakeven when the first target hits. Target: The first objective equals risk (60) at 0.5280. The second objective is 0.5340. Trading Tip - It is difficult to find a decent range setup that is not highly sensitive to highly volatile risk trends. NZDUSD cannot avoid the link to the back and forth in sentiment; but it does have a promising technical setup. Since reversing from a six-year low back on February 2nd, this pair has cut a relatively consistent advance in the form of steady trendline. And, while spot has recently pulled back on a notable bullish range break, we have seen this trend hold up with a confluence of technical support around 0.5180 to 0.5225 step in to secure a floor for price action. However, whereas this short-term setup looks promising, it is important to be cognizant of the risk of a breakdown considering the dominant trend (going back to the first quarter of last year) is bearish and that the market just recently tested a six-year low. With this in mind, we need to minimize risk. Through our strategy, we have set a relatively aggressive entry, set a stop just wide enough to cover the short-term rising trendline and range support, and we have placed our targets at reasonable levels. Nonetheless, traders that are already in a position that looks to 'go long' risk should not double their exposure through this setup. Furthermore, with event risk building and the weekend approaching, we will cancel any open orders before Friday's US consumer confidence data. Event Risk New Zealand And US New Zealand - The New Zealand dollar is still the market's ultimate high yielder amongst the majors after RBNZ Governor Alan Bollard announced his intentions to slow the pace of any further rate cuts he takes. With a 3.50 percent benchmark that could very well ride out the rest of the global recession without further undermining its advantage over its liquid counterparts, this currency looks ripe for those speculators that represent the leading edge of bulls. At the same time, any severe blows to investor confidence will deliver a significant shock to the kiwi. For more accountable fundamentals, there are a series of notable economic releases on the economic docket. For our entry time frame, our primary concern is the December and fourth quarter retail sales data. Domestic growth is still a relatively overlooked factor for this currency; but the severity of its local slump will have a greater and greater influence going forward. US - In contrast to the kiwi's status as the key high yielder, the US currency remains one of the market's most sought after safe havens. With the liquidity and security of treasuries behind the currency there is a constant support for the greenback. However, with the government inflating its budget deficit and the concept of risk/reward blurring; we may see the dollar has a more involved reaction to data that feeds into expectations for economic growth. For the remainder of this week, we will see two key consumer readings (especially in terms of growth). Timely retail sales and confidence figures will benchmark expectations for the consumers' contribution to first quarter growth. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. 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