The New Zealand dollar traded slightly lower in a quiet day of forex trading today. The technical outlook remains lower as long as downtrend resistance remains unbroken. The outlook overall is partly constructive, however, due to Monday’s jump higher above resistance.

At the start of the week, the NZD rallied above resistance at 0.7177 but it wasn’t able to sustain the rally and closed well-below resistance and was lower on the session. Once again today, the NZD attempted to rally but it closed at a relatively unchanged level, generating a doji star pattern.

Though we can’t ignore the bullish breakout, we see the overall move as bearish, especially given the downtrend that has been in place since October.

Looking through the charts today, NZD/USD jumped out at us. We noticed on Friday that the pair had formed a bearish englufing candle formation on the daily chart. That set off a drop on Monday but the losses were supported when NZD/USD fell to the 200-day moving average at 0.7002. That triggered a turnaround and now we have a bullish hammer formation.

Notice the support from the red 200-day moving average line as well as the big red candle a day earlier. The 100-day moving average (in blue) is also shown.

Overall, NZD/USD looks to be setting up for a big move. The market is locked between the 100-day and 200-day and when it breaks out it will likely test the trendlines shown on the chart.

Technically ,we like the downside in the medium term because the trend is clearly down. In the short term, however, the hammer pattern is bullish and we expect to see NZD/USD rally to 0.7100 initially. We would be a seller of strength, but not until 0.7150 with a stop at 0.7177.

The New Zealand dollar bulls haven’t had much to celebrate lately and with another slump on Monday, it’s not looking much better going forward.

The kiwi dollar has fallen below the 200-day moving average and it was the weakest performing major on Monday. Support levels continue to break down with 0.6685 clearly in the headlights and the potential for 0.6196 if that gives way.

We have added the Bollinger Bands to the chart to show that the pair is becoming somewhat oversold. It would be no surprise to see a re-test of 0.7000 but we would be better sellers on any bounce. This chart is as bearish as any one out there.

Non-farm payrolls is always our favourite time of the month. It’s when the U.S. releases the most recent employment data and it’s always a major market mover. This month’s report — which will be released a 8:30 a.m. New York time on Friday — is especially anticipated given the heightened volatility in the market and the potential for massive reversals.

Technically, there are some very fascinating signals on key charts that indicate Friday is going to be an exciting trading day.

A chart we have been watching closely for the past few days is NZD/USD.

We noted how it broke below major trendline support and then yesterday rebounded in a retest of that support. If failed, however, after a disppointing employment report from New Zealand.

Today, despite the enthusiasm in stock markets, the risk-sensitive kiwi could hardly catch a bid. A big part of the reason were comments from Reserve Bank of New Zealand Governor Alan Bollard. He compares Australia and New Zealand:

Bollard said both countries have survived the crisis well, due to a mix of strong institutions and stimulative policies.
“However, their immediate prospects are different. Australia has avoided negative growth, and its prospects are driven by strong terms of trade, vast mineral deposits, the Chinese market, and rapid population growth.
“New Zealand has had a recession, and the pick-up is slower and more vulnerable – a difference financial markets do not appear to appreciate.

“This is particularly evident in the relatively stable cross-rate on foreign exchange markets. If financial markets can’t see the differences, they will eventually lose money, and it will hurt the New Zealand economy.”

We all know the expression “Don’t fight the Fed.” The question now, is: “Do we fight New Zealand’s central bank?”

This isn’t the first time Bollard and the RBNZ have tried to talk down the kiwi, but it’s by far the most explicit. The reason he wants a weaker New Zealand dollar is because it assists the manufacturing and exporting community.

Back to the chart: notice the final two candles. They are a candlestick shape that’s called a doji star. It occurs when you have long shadows and a nearly non-existent real body. It’s the classic sign of market indecision. It makes great sense in the kiwi because we have seen a long uptrending period but now the market is unsure if it wants to continue higher (back above the trendline) or plunge down into the 60-cent range.

What is particularily interesting about the kiwi is that it’s probably the most risk-sensitve currency at the moment due to its struggling economy and the huge run-up it has experienced in the past 7 months. Where the kiwi goes, the rest of the market may very well follow.

We are seeing similar patterns in USD/CAD and EUR/USD. Both traded in very tight ranges over the past 24 hours and are likely to experience a big move on Friday.

The deciding directional factor will almost assuredly be nonfarm payrolls. The October report is expected to indicate the U.S. economy shed 175k jobs in the month, an improvement from the 263k shortfall in September. The unemployment rate, meanwhile, is forecast to rise to 9.9% from 9.8% the prior month.

Look for something above 250k, or below 100k to really get markets moving. If the unemployment rate rises above 10%, look out.

Yesterday, we talked about NZD/USD and warned about a retest of the critical uptrend that was broken on Nov. 27. We warned that we may see another retest of that trendline and that is exactly what happened today.

Bounced right off the trendline

XAU/USD

Gold prices reached an all time record high yesterday. Gold trading is currently on the rise and continues in that direction with an increase of about 5% to the price of $1037 an ounce. The previous record price of gold was recorded in March 2008, when gold reached the price of $1032 an ounce.

Gold is becoming more attractive to buyers as the USD continues to drop. The price increase of the gold can be seen when looking at the CAD/USD, AUD/USD and NZD/USD. Those pairs are what some call commodity effecting pairs and they continue to indicate the weakening of the USD.

This is an exciting time for us as traders as we are witnessing record high for the gold and the unprecedented weakening of the USD.  We talked about the G7 meeting that happened over the weekend yesterday and I will continue to wait and see the outcome of that joint statement since the market is continuing with the technical trend and ignoring some of the fundamental news coming out as of late.

By the way yesterday we talked about the USD/CAD below you will see the results of the pair over the trading day. Needless to say the fundamental news had some affect on this pair.

Fundamentals:  We have a few announcements today that will affect the market.

Coming from Europe we have the “Final GDP”.  The previous announcement was -0.1% and the forecast for today is -0.1%. Released at 9:00 GMT.

Two  more announcement coming are also expected. One from the EU being the “German Factory Orders m/m” which will be released at 10:00 GMT, the previous announcement was 3.5% and the forecast for today is 1.3%. Also coming from US we have the “Crude Oil Inventories”. The previous announcement was 2.0M; the expectation is at 2.8M this will be released at 14:30 GMT.

NZD/USD

Let’s start analyzing this fascinating pair, earlier this week, the New Zealand dollar continued strengthening, you can clearly see it on our daily chart.

After rising by about 178 pips the New Zealand dollar moved to its highest point since the 21st of august 2008.NZD/USD has bounced from 0.1737 to previous levels close to 0.7281. Currently the pair is trading in the uptrend range between 0.7185 to 0.7281over a daily chart, it is important to note that there is a strong resistance point at 0.7310.
This pair is a wonderful pair for trend traders, we can find some opportunities by continuing to trade with this pair. Let’s convert yesterday’s movements to profits.

Resistances-0.7270-0.7310

Supports-0.7230-0.7200

Fundamentals:  We have a few announcements/meetings today which will affect the market.

Coming from U.K we have the “MPC Meeting Minutes”. (09:30 GMT) One more announcement coming in from The US “Federal Open Market Committee” which will be released at 19:15 GMT. At the same time we have Federal Open Market Committee Statement.

Fundamentals:  We have a few announcements today which will affect the market.

Coming from Canada we have the “Canada Mortgage and Housing Corporation ”. The previous announcement was 134K and the forecast for today is 138K. (12:15  GMT).

one more announcement coming in from New Zealand is the  “Reserve Bank of New Zealand, Official Cash Rate ” which will be released at 21:00 GMT. The previous announcement was 2.50% and the forecast for today is 2.50%. At the same time we will have a Reserve Bank of New Zealand Conference which will issue a statement.

I want to start the day by explaining a little about some of the trading strategies in the Forex Market. In order to recognize some of the strategy’s available you need to determine what kind of a trader you are.

Frequently asked questions are, when is the right time to close or to open the position? Or how long should I keep the position open for? This questions is part of the trader’s strategy, let‘s look over the one that will fit your trading strategies and how this varies from one person to the other.

Long-term- usually prefer a daily or a weekly charts, the trader need lots of capital in order to keep the positions alive for a long period of time. The trader will usually close the position when he is pleased From total profit. You can make a lot of profit by joining the trend

Short-term- usually prefer an hourly chart and analyzes the market by combining technical and fundamental information and  can make a good profit from the changes in the range of the currency pair traded.

Intraday – usually prefer a minute’s chart to trade. It is also known as scalping. It is a trading strategy that allows the trader to open and close positions within a few minutes thus taking advantage of minute analysis and reviewing the performance of the currency with little regard to fundamental analysis.

All of the strategies I mentioned above allow you the opportunity to make money is the forex industry. The big question is which one will suits you trading style and goal.

NZD/USD

One of the most closely watched pairs over the last few days has been the Kiwi against the USD.

Last week we noted that this pair came to a point of 1.6991 on 09/01/08 almost exactly on its 1 year anniversary. Wow!! We will have to wait and see if the markets will react to this and go with the uptrend. This week we will look for the Kiwi to hit new levels and this uptrend is likely to continue.