North American markets are in a bit of pickle lately as US data hasn’t exactly shown a clear sign of what future Federal Reserve policy will look like. While data points like today’s CPI was better than anticipated, it still wasn’t encouraging for the Fed, but could be discounted slightly as the Core CPI was pretty decent. Then New Home Sales blew away expectations, which was confusing because Existing Home Sales were so brutal yesterday. As soon as investors felt they had a grip on how US metrics were shaping up, something confuses the picture and essentially changes the narrative. That is likely one of the reasons we’ve seen so much volatility in equity and currency markets since last week as ideas of the future are changing with each subsequent data release.
In today’s trade, equities started lower, tried to mount some strength, and then sold off for the remainder of the day while the USD tried to assert its dominance in the currency world. Commodities weren’t phased as much as they either went sideways (oil) or showed at least some strength (gold). Moving forward, USD bulls may try to gain back lost ground as the memory of the Fed meeting gets fuzzier and fades in to the background.
On a more immediate tilt, there are multiple opportunities arising for New Zealand which is releasing their Trade Balance this afternoon. Earlier, I provided an idea for the NZD if it were to outperform the consensus expectations of a 375M surplus; but what if it doesn’t? Typically, looking for technical setups that can supplement a fundamental reaction provide the most satisfaction in market moves and such a scenario is presenting itself in the NZD/CAD.
The recent strength of the NZD/CAD has brought it up to a Fibonacci based level that carves out a Bearish Butterfly pattern near current levels. This pair has been rejected twice off this resistance region both late last week and early this week, and if NZ Trade Balance disappoints, it could be a sign that a move down is in order.
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