Key Points:
- Bearish week looking likely ahead.
- ABC wave seems to be intact.
- Busy news week should see volatility spike.
It’s a busy week ahead for the Kiwi Dollar which means it’s worth taking a closer look at the pair to try to establish both a fundamental and technical bias moving forward. Additionally, we should investigate what happened over the prior sessions and how this has positioned the NZD ahead of the slew of data that is coming down the line.
Starting with how the pair got to where it is now, the Kiwi Dollar came under some heavy fire last week, eroding a fortnight’s worth of recovery in only three sessions. Specifically, Monday through Wednesday saw the pair plunge from 0.7038 to just 0.6893 as a lack of NZ data left it exposed to the influence of the surge in US New Home Sales to 621K m/m. However, the severity of the slide indicates that the sharp reversal could be more down to the return of that ABC wave that had, until recently, been thought to have been disrupted.
But what do the technicals indicate is on the cards for the week to come? Well, the revival of that ABC wave is likely going to keep the NZDUSD under pressure throughout the week which could lead to substantial losses if the current support level is broken which presently looks rather likely. Indeed, the highly bearish Parabolic SAR and EMA biases are suggesting that such a breakout is warranted which leaves us with quite a bearish forecast for the week ahead if the fundamental results underwhelm.
Speaking of which, as mentioned, it’s rather busy on the fundamental news front which could mean some decent price movements lay ahead. Most of the NZ-centric news is scheduled for Tuesday and includes the GDT Price Index, Employment Change, and Unemployment Rate figures. Of course, the dairy price data will be the major driver of prices as is usual but don’t discount the impact of the employment figures. Notably, given that we are expecting the jobless rate to hold steady at 5.2%, stay alert for any surprises during the release as they could amplify or curtail fallout of the GDT figure.
Ultimately, we will simply have to wait and see if the above mentioned fundamentals prove to be disruptive or in line with the bearish technical forecast. Regardless, even if we see a strong uptick in the GDT figure or a major drop in unemployment, gains will be limited by the technicals which minimizes upside risks moving forward.
