medium term short opportunity in NZDUSD

The economic data from New Zealand disappointed again. Employment q/q fell again, this time by 0.8%, worse than expected -0.3% from -0.4% the previous quarter. Equally bad came out the unemployment number. Unemployment increased to 6.5%, exp. 6.4% from previous 6%.

Both numbers point to worsening labor market situation. Improvement in the labor market is necessary requirement for overall macroeconomic conditions of NZ so we will probably not be positively surprised by upcoming economic releases. New Zealand is an important exporter of dairy products and meat. We can be sure that the huge appreciation that the kiwi experienced (0.48 just in March!!!) is very negative for exporters. Fundamentally, NZDUSD should head down.

Looking at daily chart, we can see that the downtrend has already started. The price fell below 10, 20 and 30 EMA and broke below long term upward sloping trendline support. The price than retraced, tested this trendline (now resistance) and bounced off. The aformentioned EMAs started to point down which confirms that current trend is down.

For medium term trade with favorable risk/reward we can open short position at current price (around 7210) with stop above confluence of trendline resistance and 30 day EMA at 7320 risking 110 points. If the price breaks below previous low at 7094 it confirms that retracement of the bull move started and we will see significantly lower levels in the future.

Potentional risk is seen in continued USD selling with higher equities and commodities, especially gold and oil.