On December 10th, I identified a potential Bearish Gartley pattern that was respected and kept the bearish channel intact. The initial price objective was reached and further commodity currency pressure has so far supported a move lower.
With thin markets firmly in place, the next key release for NZD/USD will be Chinese Manufacturing PMI on Tuesday, New Year’s Eve. A positive beat may occur and with that, we may a slight rally for the kiwi. The key storyline for this thin trading week is that US 10-year yield has hit 3.0% and the U.S. dollar has yet to display a significant move higher against the commodity currencies.
Price on the daily chart for NZD/USD is displaying a potential double bottom at .8150 in the short-term (highlighted by two green arrows). So far, we have seen short covering triggering a climb towards the Christmas gap at .8180. It is at this level that some selling interest may prevent a move above .8200. Eventually we may see minimum momentum drive a move towards the 50-day Simple Moving Average at .8265 and possibly breaking the downward channel.
The trade: Buy NZDUSD at .8215 with a stop loss at .8190 and a take profit at .8265. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading