After trading near highs early this week not seen since the third week of June, the NZD/USD currency pair has started to look technically bearish again.

The NZD/USD is mirroring results seen in many Forex spheres the past two days of trading; suddenly the USD has gotten stronger again.  As of this writing the NZD/USD is trading near 0.62900, which is actually close to interesting resistance up above.

If the 0.63000 mark gets challenged and sustains value above, this could be taken as a sign by some technical traders that additional buying action may ensue. However, traders may want to remain realistic regarding their upwards targets and keep their ambitions rooted with solid risk management, including take profits that cash out winnings before the potential of downturns following.

USD/NZD may have additional territory to Explore Downwards in the Near Term

On the 2^nd of August the NZD/USD was trading fractionally higher compared to today, and the 0.63000 level started to become resistance technically.  Prior to this on Monday the 1^st of August the NZD/USD was traversing near the 0.63540 ratio before losing ground, the last time those highs were seen was on the 21^st of June. However, before traders become convinced the long term bearish trend of the NZD/USD is about to vanish completely, they should understand the global economic climate remains challenging. The sudden downturn of the NZD/USD may prove durable in the near term.

The Move Higher in the NZD/USD has lost Power and Resistance is beginning to Flourish

If the value of the NZD/USD remains under the 0.63000 level for a sustained amount of time today and head’s into tomorrow with tests of support levels, this could spur on further downside momentum. Traders hoping for reversals upwards should be willing to look for quick hitting positions.

From a risk reward scenario near term in the NZD/USD, there appears to be reasons to suspect nervous sentiment is again building, and a risk of more selling pressure could emerge. Traders may become nervous as ‘chirping’ from U.S Federal Reserve officials have been quick to point out this week they believe more interest rate hikes are needed, not only one more in September.

Technically if the 0.62790 mark begins to falter, additional selling may build which could create a quick test of yesterday’s ratios near the 0.62600 to 0.62500 to be exhibited. Traders should expect some volatility for the NZD/USD the next two days of trading as financial houses continue to search for equilibrium in rather unclear Forex conditions fundamentally, which are bound to cause choppy conditions.

NZD/USD Short Term Outlook

Current Resistance: 0.62998

Current Support: 0.62790

High Target: 0.63185

Low Target: 0.61940

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The pair will likely keep falling as bears target the key support at 1.055.

Bearish View

• Sell the EUR/USD and set a take-profit at 1.0550.
• Add a stop-loss at 1.0725.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.0680 and a take-profit at 1.0790.
• Add a stop-loss at 1.0600.

The EUR/USD pair retreated after the Federal Reserve prepares to start its quantitative tightening policy. It also declined as investors wait for the upcoming jobs numbers from the United States. It is trading at 1.0643, which is slightly below this week’s high of 1.0786.

Fed Prepares for QT

The EUR/USD made a strong pullback on Wednesday after the Fed made plans to start shrinking its $8.9 trillion balance sheet. The bank is expected to reduce its assets at a pace that is twice as fast as the last financial crisis. The current size of quantitative tightening is about $47.5 billion per month. It will then double to $95 billion in September.

The Fed hopes that a combination of balance sheet reduction and high-interest rates will slow the economy and inflation without causing a recession. It has hinted that it will hike interest rates by 0.50% in the next three meetings and then shift to 0.25%.

However, some analysts believe that the Fed could pause rate hikes in September as it reflects on the impact. Notably, many investors believe that inflation growth may have peaked in April.

The next key catalyst for the EUR/USD pair will be the upcoming US jobs numbers. On Wednesday, data by the Bureau of Labor Statistics showed that the number of job openings slowed in April. The country had about 11.4 million openings, down from the previous 11.85 million.

On Thursday, ADP will publish its estimates for private payroll data. Economists expect the data to show that the private sector added 300k jobs in May from the previous 247k. The BLS will also publish the closely watched initial jobless claims.

And on Friday, the BLS will release the non-farm payroll data. The expectation is that the unemployment rate declined in May while wage growth continued.

EUR/USD Forecast

The four-hour chart shows that the EUR/USD pair declined to a low of 1.0627 in the overnight session. This was the lowest it has been since May 23rd. Also, the price was slightly below the 38.2% Fibonacci retracement level. At the same time, it has moved below the 50-period moving average while the MACD has crossed the neutral point.

Therefore, it seems like the recent rally may have peaked. As such, the pair will likely keep falling as bears target the key support at 1.055.

The US dollar has fallen hard during the trading session on Friday to reach the 1.29 area against the Loonie. The Canadian dollar has a strong correlation to the oil market, which of course was very strong during the session. The question now is whether or not the previous resistance will offer support near the C$1.29 level, or if we continue to fall and breakthrough that area to enter the previous consolidation area? Ultimately, the market should have a little bit of a reaction to that area based on the gap that we have jumped above.

The size of the candlestick is rather bearish, but it is also worth noting that we have seen a lot of support there over the last week, so it will be interesting to see if we can bounce from here. A lot of this will come down to whether or not oil truly takes off, and if the US dollar gets a bit of a pullback in general as it has been extraordinarily strong against multiple currencies, not just the Canadian dollar if the US dollar takes a bit of a breather, that might be reason enough to have this market pullback.

However, if we were to turn around and bounce from here, the market could go looking to take out the C$1.30 level next. If we rally above there, then it is likely that we could go looking to reach the C$1.31 level. A lot of this could be influenced by oil, but it also could be influenced by fear, as the US dollar continues to be the first place people run to when they are concerned. That being said, it is worth noting that this pair does tend to be very choppy as the two economies do so much in the way of cross-border transactions. You can think of this a lot like the EUR/GBP pair, as there is a lot of noise between both of those currencies as well.

If we were to break down below the C$1.29 level, we will more likely than not see a bit of support come into the picture not only at the gap, but also at the 50 Day EMA which is rising at this point and looking to be influential yet again as we have seen it be so many times in the past.

As things stand right now, you are better off trading with a small position and then adding as the market works out in your favor.

The Bitcoin market fell a bit on Friday to show signs of negativity. While we have not broken down below the hammer from the Monday session, we are approaching doing that. If we break down below the Monday hammer, then it is likely that we will go looking to reach the $37,500 level. Breaking below that level could open up the possibility of a challenge to the $35,000 level underneath, which has been rather significant support. For Bitcoin to come even remotely close to saving itself, it must stay above the $35,000 level.

Bitcoin failed at the 50-day EMA over the last couple of days, and it now looks as if we are struggling for footing. The US dollar continues to strengthen, so it does make sense that the BTC/USD pair would fall as the US dollar is half of the equation. The size of the candlestick is somewhat telling because it is bigger than many of the previous ones, but it is not necessarily a brutal candlestick. In other words, there is still a significant chance that the market hangs on in this general vicinity.

As far as buying is concerned, at the very least you would need to see the shooting star taken out to the upside from the Thursday session. That would not only clear a long wick to the upside, but it would also have the market break above the 50-day EMA. In that scenario, it suggests that the market is more than likely going to continue to go higher. The $45,000 level is an area where we have seen a lot of resistance, but it would make a nice target given enough time.

In general, Bitcoin has simply been consolidating for quite some time, but it is also worth noting that as things stand right now, it is a market that continues to see buyers come in at higher levels than the previous time. However, we have not necessarily seen any type of bullish sign, just that we have not broken down. I suspect that Bitcoin is about to make a bigger move, and it should become much clearer rather soon. As things stand right now, you are better off trading with a small position and then adding as the market works out in your favor.

U.S. economic recovery slows; USD loses steam for the second consecutive week.

The United States Bureau of Labor Statistics reported last week that non-farm payrolls stood at 245,000, which is lower than expectations of 469,000 and last month’s 610,000. Average hourly earnings climbed by 4.4 percent in November (year-on-year) while gaining 0.3 percent in monthly terms. The unemployment rate was at 6.7 percent in November, an improvement from the previous month’s 6.9 percent and surpassing forecasts of 6.8 percent.

The sharp deceleration of employment suggests that the US economic recovery may take longer than previously expected. Some analysts found the report disappointing and interpreted it as a sign of economic trouble.

The COVID-19 situation itself does not support optimistic narratives, as cases keep surging. So far, 14,983,425 coronavirus cases have been reported in the United States, as well as 287,825 deaths, making it the most affected country in the world. Hospitalization and deaths recently hit record levels, which may be linked to the recent Thanksgiving celebrations that were held across the country.

Paradoxically, this news was taken positively by the stock markets, as US shares closed in mainly positive territory on Friday. The Dow Jones Industrial Average gained 0.83 percent during the session, closing at the 30,218.26 level, followed by the S&P 500 which gained 0.88 percent during the session and closed at the 3,699.12 level. The NASDAQ 100, which closed at the 12,528.48 level, gained 0.49 percent during the session.

Attention is on the Federal Reserve, which is now expected to boost its bond-purchasing program in an attempt to stimulate the US economy. This idea was somewhat confirmed by Federal Reserve Chairman Jerome Powell’s recent comments about the path that the bank is taking in the near future.

“We are going to keep our rates low and keep our tools working until we feel like we really are very clearly past the danger that is presented to the economy from the pandemic,” he said.

Additional fiscal stimulus is also a possibility. Though negotiations on a new stimulus package are yet to resume, new proposals are now being considered in the U.S. Senate.

Economic Calendar

The markets received important and relevant data about the current state of the US economy.

Among the most relevant reports was the Chicago Purchasing Managers’ Index for November, which signaled an expansion of the business sector across the states of Illinois, Michigan and Indiana. The reading stood at 58.2, below the previous month’s 61.1 and lower than expectations of 59. The Pending Home Sales Index dropped by 1.1 percent, below predictions of a 1 percent surge but better than the previous month’s figure.

Markit Economics reported the Manufacturing PMI on Tuesday, which showed an expansion of the sector but remained below expectations of a steeper expansion and the previous month’s 59.3.

November’s employment change figure was reported on Wednesday, which stood at 307,000, lower than expectations and the previous month’s figure.

The Service PMI was released on Thursday, signaling (again) a slower expansion of the sector with a final reading of 55.9. Expectations were of 56, and the previous month’s reading stood at 56.6.

US Dollar Loses Steam for the Second Consecutive Week

The US Dollar Index, which measures the greenback’s performance against a bundle of its main competitors, lost ground for the second consecutive week and dropped by 1.19 percent. The dollar went down by 0.65 percent last week, which resulted in a drop of 2.31 percent for November.

Many analysts attribute this weakness to the fact that investors are currently rushing towards riskier assets, now that the hopes for a vaccine are high.

Some of these analysts expect this weakness to persist through 2020, as they expect additional monetary stimulus. Others predict that the dollar’s and equity markets’ performance-inverse relationship will remain relevant in the near future.

“We forecast another 5-10% dollar decline through 2021 as the Fed allows the U.S. economy to run hot,” said analysts at ING.

US Economic Data Worse Than Expected

In its last report, the Bureau of Economic Analysis reported that the gross domestic product rose by 33.1 percent in the third quarter (quarter-on-quarter), below expectations of 33.2 percent and after decreasing by 31.4 percent in the second quarter.

Inflation has been low, at least compared to the Federal Reserve’s inflation target. In yearly terms, the Consumer Price Index missed analysts’ expectations, climbing by 1.2 percent in November after an increase of 1.4 percent in the previous month. In monthly terms, the CPI stood at 0 percent, below forecasts of a 0.1 percent increase and lower than October’s 0.2 percent.

As mentioned, the unemployment data turned out to be disappointing, standing at 6.7 percent in November. While this did not meet expectations, it was lower than the previous month’s 6.9 percent.

At the moment, cash rates remain at 0.25 percent. The Federal Reserve’s upcoming cash rate announcement is set to take place on December 16.

Upcoming Events

• On Tuesday, the Energy Information Administration will be releasing its short-term energy outlook.

• On Wednesday, the US Bureau of Labor Statistics will be publishing its JOLTs Job Openings report.

• Also on Wednesday, the Energy Information Administration will be reporting about the Crude Oil inventories level.

• Core CPI data for November will be reported on Thursday, as well as initial jobless claims.

• On Friday, the U.S Bureau of Labor Statistics will be releasing the Producer Price Index.