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ridethepig | NZD Market Commentary 2020.01.10

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AUD data continues to improve and with retail sales overshooting AUDUSD is approaching the key 0.690x. It is hard to argue for a cut this Feb with domestic data improving, though it will take a break above 0.692x for me to get excited. I am bullish on AUDUSD medium term but expect some of those who initiated longs yesterday and positioned for weaker US payrolls have a good opportunity to unwind. NZDUSD will move as collateral and therefore look for the same flows in NZDUSD.

For the event today markets are tracking for 160k on the headline. Today I am against consensus and my models have forecast a slight undershoot to 123k via Holiday seasonal effects. This will trigger a soft knee-jerk reaction in USD sell-off before profit taking kills the day. Only a heavy miss (below 75K) short-circuits the expected flow as will initiate an impulsive move to the downside in USD.

We are starting to get very complex trading here with flows inside flows inside macro flows. Here would be worth thinking about the 2020 macro map to follow up with:

The lust to expand the retrace is still there, despite all countermeasures from bulls. The correct move, however, is a short-term news flow play with targets 0.664x and 0.666x before profit taking (and short-term selling opportunities are up for grabs).

So we may say; massive undershoots would be good, because we will have another possible ticket in the USD devaluation leg with NZDUSD trading eventually towards 0.690x. The risks to trading this leg come from overshoots on the payroll side with NFP (unexpected).

Good luck all trading NZDUSD into the flows today.

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