New Zealand Dollar Resistance Provides Range Trade Oppurtunity

NZD/USD has been a clear range trade candidate since mid-October. And, while the rising trendline pulling up support has been the more consistent level in the range, resistance around 0.78 has proven itself equally reliable in rejecting market runs. Technically, the biggest problem with a short position to take advantage of this pair’s range is that 0.78 has seen aggressive spikes that have pulled back before the daily candle could close.

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Trading Tip[/B] – NZD/USD has been a clear range trade candidate since mid-October. And, while the rising trendline pulling up support has been the more consistent level in the range, resistance around 0.78 has proven itself equally reliable in rejecting market runs. Technically, the biggest problem with a short position to take advantage of this pair’s range is that 0.78 has seen aggressive spikes that have pulled back before the daily candle could close. To conservatively play this range, a 110-point stop would be optimal, but that opens us to too much risk; so we are setting a much more reasonable risk under the expectations that another spike of the November 11th magnitude will not form. On the other hand, this position should be monitored if spot is near resistance just before Tuesday’s NFP release. Cautious traders could remove the position if it is too close to resistance heading into this event risk (to avoid a break or whipsaw). If spot reaches 0.7720 before our position is triggered, we will cancel our orders.
[B]Event Risk New Zealand and United States[/B]
[B]New Zealand[/B] – The clear highlight on New Zealand’s calendar will come from Wednesday evening’s Retail Sales report, while earlier House Prices and Food Price inflation numbers may likewise force volatility across NZD pairs. Consumer retail Otherwise, traders are likely to watch for any surprises in Tuesday’s Food Price inflation reports, Sunday’s House Prices data, and Thursday’s Manufacturing Activity results. Though these reports do not typically force major volatility across NZD pairs, recently hawkish RBNZ rhetoric may shift focus towards individual releases in order to gauge interest rate prospects.
[B]US[/B] –The clear US calendar highlight will be the FOMC Rate Decision due on December 11, while earlier Home Sales data and later Advance Retail Sales figures may likewise generate substantial intraday volatility. Market expectations for the Fed’s interest rate decision have been wrought with uncertainty—a recipe for strong volatility on the release. Range traders should likewise watch for any particularly pronounced surprises through later-week PPI, Advance Retail Sales, and CPI results. Any one of these reports could drive substantial price movements in the US dollar. As such, range traders should take special care to avoid excessive adverse continuation following these reports.

                                     [B]Data for December 9 – December 16[/B]
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                                   [B]Data for December 9 – December 16[/B]
                                                     [B]Date[/B]
                                   [B]New Zealand[/B][B] Economic Data[/B]
                                   [B][/B]
                                   [B]Date[/B]
                                   [B]US Economic Data[/B]
                                                     Dec 10
                                   New Zealand Manpower Survey (1Q)
                                   
                                   Dec 10
                                   Pending Home Sales (OCT)
                                                     Dec 10
                                   Terms of Trade Index (3Q)
                                   
                                   Dec 11
                                   FOMC Rate Decision
                                                     Dec 11
                                   Food Prices (NOV)
                                   
                                   Dec 12
                                   Trade Balance (OCT)
                                                     Dec 12
                                   Retail Sales (NOV)
                                   
                                   Dec 12
                                   Import Price Index (NOV)
                                                     Dec 12
                                   Business NZ PMI (NOV)
                                   
                                   Dec 13
                                   Producer Price Index (NOV)
                                                     Dec 13
                                   Manufacturing Activity (3Q)
                                   
                                   Dec 13
                                   Advance Retail Sales (NOV)
                                                     Dec 14
                                   Non-Residential Bond Holdings (NOV)
                                   
                                   Dec 14
                                   Consumer Price index (NOV)