Last night, the New Zealand unemployment rate worsened and kiwi remained under pressure as it was already weak from falling dairy prices. Statistics New Zealand reported that the unemployment rate remained unchanged for the quarter ending in March after the prior quarter was revised higher to 5.8%. Earlier in the week, dairy prices declined for the fourth consecutive time by -3.5%. Recent data may now support the Reserve Bank of New Zealand to cut rates as soon as June.
Price action on the 30-minute NZD/USD chart shows the overnight plunge found support just ahead of the .7450 region. Early in New York, price has rebounded considerably and could potentially form a bearish Gartley pattern at the .7535 level. If valid, we could see the currency pair drop off considerably and approach the 2015 low area of .7175.
If we do see a rebound, .7560 will serve as key resistance. Only a daily close above that noted level after Friday’s US Non-Farm payroll report would signal a potential pause with the bearish bias. If the US has a terrible employment report, the kiwi may rally towards .7650.
The trade: Sell NZDUSD at .7535 with a stop loss at .7605 and a take profit at .7325. The Risk/Reward Ratio is 1:3.
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading