Good morning team,
Very frustrating reversal across the markets overnight, we will look to revisit the USDCAD at a later stage. For the time being, we are taking a look at the NZDUSD as there are a number of bearish signals suggesting further downside.
DXY reversal overnight resulted in a risk-on sentiment with equities and cryptos recovering from the Wednesday night SELL off. This comes despite the President of the Dallas FED publicly calling for bond tapering. “Maybe taking the foot gently off the accelerator would be a wise thing to do here so that we can manage this transition more effectively”. “That’s why I have encouraged sooner rather than later we begin a discussion of these purchases.”. Pairing this with the FOMC minutes which suggested the FED is open to bond tapering, we see the possibility of a stronger USD over the coming weeks as a high possibility.
Goldman Sachs Bond Tapering Forecast
Goldman’s are forecasting the FED to begin bond tapering in early 2022 therefore markets will begin to price that in over the coming months.
NZDUSD – 4 Hour Charts
The 4-hour charts are showing a trend line breakdown followed by a retest of the structure. There is also a classic head and shoulders formation in play suggesting a continuation to the downside.
NZDUSD 1 Hour Charts
We just need to be aware of the lower pennant formation trend line which could provide some support.
Trade Setup: SELL Market Execution, current price 0.7188, stop loss 0.7258 and take profit 0.7050.
Stop loss: 70 pips
Take profit: 137 pips