NZDUSD has been on my watch since breaking below wedge support on October 27th. As expected, shortly after that break the pair found support at the 0.6620 handle, a level that has acted as support and resistance since July.
Another level that I mentioned in that October 28th commentary (link above) is the trend line that extends off of the July 10th high. This level was tested as resistance on July 29th and again on August 21st before transitioning to support on the 13th and 14th of October.
This past Wednesday’s session left the pair sitting less than 10 pips above this key level. However, the pair managed to find a bid during yesterday’s session, but ultimately lacked the strength needed to climb back above the 0.6620 handle.
This leaves the kiwi in a vulnerable position heading into non-farm payroll, which is scheduled for release at 8:30am EST.
While there is no valid trade setup at the moment, a strong NFP figure could push NZDUSD back below the four-month trend line. This would offer traders a chance to watch for a selling opportunity next week in the event the bulls manage a retest of the level as new resistance.
On the flip side, an unfavorable NFP figure could push the pair back above the 0.6620 level. This would invalidate the bearish bias and expose former highs at 0.6783.
Regardless of which direction the upcoming event risk takes us, it’s imperative to wait for a daily close as confirmation. Not only will this give you more conviction for any potential trade setup next week, it will help you avoid the volatility that often surrounds an event like NFP.
Summary: Watch for a selling opportunity on a daily close below trend line support that extends off of the July 10th high. Key support below that comes in at 0.6455 and 0.6240. Alternatively, a close back above 0.6620 would negate the bearish bias and expose key resistance at 0.6783.