NZD/USD: Bears piling in below key support for a test of the 38.2% fibo retracement of Fed rally

• NZD/USD slipped from the 0.6940s to 0.6890 on Friday despite a risk on mood on Wall Street following the nonfarm payrolls data outcome. 
• NZD/USD is currently trading at 0.6893 from a higher of 0.6903 and up from 0.6891 the low. 

The bird lost flight on Friday, although higher on the week. A mix of Fed sentiment and geopolitics have been the key driver although Friday's U.S. jobs data and ISM gave the dollar a boost. US payrolls surged 304k in January - significantly above consensus expectations (+165k) - despite the partial government shutdown. The January ISM manufacturing index rose 2.3pts to 56.6 vs 54.3 in December. New orders rose to 58.2 vs 51.3. The data suggest strong momentum in manufacturing at the start of 2019, but regional indicators have not been nearly as upbeat of late.

"Kiwi gave back some of its gains, with the USD gaining some on the back of positive data releases overnight. The disappointing China PMI has also been a contributing factor. NZ employment data is on the horizon this week, which may see the kiwi test the upside once more. We expect this pair to range sideways in the meantime," 

analysts at ANZ Bank explained. 

The week ahead:

We have a number of key events this week that include the RBA, BoE, Fed speakers and the US data dump. Domestically, however, NZ employment will be key:

"Our +0.5%/q in employment (mkt flat to +0.6%) and a lower participation rate of 70.9% (mkt 71.1%) lowers the unemployment rate to 3.8% (mkt 3.8% to 4.2%). Wage growth is important for the NZD, and we look for wage agreements to generate a decent +0.6%/q (mkt +0.6%/q) a benign forecast but follows years of +0.4%/q, and generates 2%/y wage inflation, the highest since mid-2012,"

analysts at TD Securities explained 

NZD/USD levels  

• Support 0.6870 
• Resistance 0.6960

There is an hourly double top around the swing highs of 0.6940, which is bearish. A continuation to the downside would first need to hold below the confluence support at this juncture which could be a tough area to break. Bears will target the 38.2% Fibo zone made up of the Fed rally pullback lows of 0.6886 and the Fibo level at 0.6893 first of all. The 50% level is located at 0.6879.