NZDUSD Valentine's Day Massacre

Feb 14, 2017

With Janet Yellen's testimony in front of Congress keeping USD pairs trading within a rather conservative and cautious range, the game plan moving forward relies heavily on the "post-Fed trend" that occurs once tensions have eased and money starts changing hands again. Since then, Trump's comments on immigration reform, protectionism, and heavily manipulated trade deals have all but erased gains seen on the USD, which had been bolstered by rejuvenated market optimism following the FOMC rate hike. Now NZDUSD appears to be rebounding off the 7400 level, harkening back to election night. Just as the post-election rally had been built on the promise of more rate hikes (well, infrastructure spending - stimulus - inflation - economy "cooling" measures, i.e. rate hike), the week ahead will either validate or reject the market's preemptive move to price-in a higher rate. If it does, then perhaps the market respond as it did post-election.

In any case, I expect some downside momentum to carry the pair down to the 7065 level, or 61.8% retracement from the swing low at the end of December and the swing high in early February. The 72200-72250 range provides considerable resistance, so best keep stops at a safe distance from tomorrow's volatile swings.

Feb 16, 2017

Comment

Looks like the dollar pullback is quite strong post-Yellen, and with so much positive data coming out recently (especially Lockhart's comments today), one can only wonder why dollar strength has created so much weakness across the board. I still expect some downside return, but unfortunately the market has been erratic in light of current events.