US ISM non-manufacturing PMI due to be released today is forecast to rise to 55.3
Amid another day of volatility led by the Italian referendum, the focus will shift to the US ISM non-manufacturing PMI, which is expected to rise for the second consecutive month, after slipping from 55.5 in September to 53.6 in October. The U.S. dollar index which showed signs of weakness last week is expected to remain range bound especially with a stronger than expected ISM non-manufacturing PMI likely to keep the bias largely flat.
The New Zealand dollar was weaker this morning after news outlets announced that the prime minister, John Key resigned from his post.
The kiwi fell 0.79% on the news before pulling back from the two-day low of 0.7069. The weakness in the NZD could therefore strengthen even more if the U.S. ISM non-manufacturing PMI comes within expectations. With the NZDUSD already posting strong declines, this would signal further weakness as price approaches the support level of 0.7050 – 0.6980.
NZDUSD is trading within the larger head and shoulders pattern that was carved out since early June this year. The main neckline support of the NZDUSD head and shoulders pattern sits in the region of 0.7000 - 0.6980.
Price initially fell to this support a week ago and as expected, price bounced off the support to rise towards a high above 0.7100. Despite this minor bounce, price action remains biased to the downside on a strengthening U.S. dollar and a weaker kiwi.
How to trade binary
NZDUSD is currently attempting to retrace its losses from earlier in the day. There is an unfilled gap at 0.7134 which could be filled if the upside momentum continues. Therefore, daily PUT options could be ideal near the strike price of 0.7134 - 0.7130 region for a 21:00 GMT expiry time.
Mind the next main support at 0.7050 which is the major support from the daily time frame and this could once again offer a bounce back to the upside. However, the possibility for this bounce to result in a lower high is quite likely meaning that NZDUSD will be looking weaker in the near term.
Target price: 0.7134
Expiry: 21:00 GMT