Kiwi has some upside.
Background: NZDUSD has made an impressive recovery from its post-Trump victory free-fall. NZDUSD dropped from 0.7402 to 0.6970. between November 8 and November 24. It has since recouped over 50% of those losses and is likely to recoup the rest of them in the coming days.
The recent GlobalDairyTrade auction results were encouraging. The 3.5% price increase was the fourth consecutive rise and more importantly, reportedly in the breakeven range for farmers.
The RBNZ signaled that it had finished easing at its November meeting. RBNZ Governor, Graeme Wheeler seemed cautiously positive in a speech on December 8. The intraday and short term NZDUSD technicals are bullish while prices are above 0.7120. looking for a break of 0.7225 to extend gains to 0.7240 and then 0.7300
The combination of a positive domestic economic outlook, high interest rates and bullish technicals suggests further NZDUSD gains to the pre-election peak.
TRADE IDEA RISKS
A major risk to this trade idea is if next week’s FOMC statement is more hawkish than expected. The ensuing US dollar rally would undermine NZDUSD and trigger the stop. Another risk is that this trade idea is late to the party. NZDUSD has already risen 50% from its recent low. It may be due for a correction which, if it over extends, will trigger the stop.
TRADE IDEA PARAMETERS
BUY NZDUSD: ½ normal position size at market (currently 0.7150) Balance at 0.7120
STOP LOSS: 0.7090, just below the 100-day moving average
TAKE PROFIT: 0.7240
TIME HORIZON 3 days
The intraday NZDUSD technicals are bullish while trading above 0.7120, looking for a break of the recent top at 0.7220 to extend gains to the pre-election peak of 0.7400.
Source: Saxo Bank
NZDUSD daily with 100 day moving average noted
Source: Saxo Bank
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