SOMA-Day Should Keep the USDollar in the Bid Zone

One of the biggest SOMA day is scheduled for February 15th and given historical correlations since Quantitative Tightening (QT) started, the USDollar is expected to surge higher. The SOMA day is a day when the Fed shrinks its balance sheet – a reduction in supply of available dollars simultaneously increases the demand for the remnant ones. In anticipation of a week of strong dollars, one should look to buy the greenback against the Oceania major pairs – AUD, NZD as their respective economies have been engulfed with weakening macro-fundamentals. For this setup, the latter speaks more volume of bearishness as the NZ surprise index is now consistent with a 5% quarterly drop.  New Zealand unemployment rate recently jumped to 4.3%. Although we already have shorted this instrument since last week, traders can still look to jump in the NZD/USD mix to buy the dollar [see H1 Chart] on the back of the aforementioned.

Fig 1: Hourly (H1) NZD/USD Chart

 

NZD/USD

Sell @ current market price (Instant execution)

Stop: 0.67770

Limit: 0.67000

 

Alternatively, price is currently trading at a significant support area @ 0.6750; should this area hold there is the increased likelihood that price would retrace upwards. Hence, traders are always advised to use a stop loss.

2 Comments to “SOMA-Day Should Keep the USDollar in the Bid Zone”

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