- The NZD/USD has broken significantly lower during the trading session on Thursday, as we have seen risk appetite get eviscerated. Ultimately, the market is likely to get looking to the 200-Day EMA, which is closer to the 0.6250 level.
- That’s an area where we could see a certain amount of support, but I also recognize that we have not broken down below there yet, so it’ll be interesting to see whether that holds.
- If it does not, then we could start to see the US dollar strengthen quite drastically against most currencies.
Ultimately, this is a situation where I think you’ve got a “risk on/risk off” type of scenario. If the risk appetite continues to get hammered, the New Zealand dollar will certainly have quite a bit of negativity attached to it as it is highly sensitive to commodity markets overall. The market is likely to continue to look at the 0.65 level above as a potential barrier, so do pay close attention to what’s going on around the world. If we continue to see a lot of negativities when it comes to commodities and stock markets, then it’s very likely that the New Zealand dollar will fall right along with them.
Waiting for Opportunities to Short the Market
Looking at this chart, the 200-Day EMA underneath will be an area of interest, but if we were to break down below there, it’s likely that we could go down to the 0.62 level, perhaps even the 50-Day EMA which is closer to the 0.6150 level. Ultimately, this is a market that I think is going to be very noisy as we head into the end of the year, and obviously, the liquidity starts to drop. It does look like the US dollar is starting to spike again, so if we do get a breakdown below the 200-Day EMA, you should have plenty of opportunities to short this market on signs of exhaustion.
On the other hand, if we were to turnaround break above the 0.65 level, it would be a very bullish sign and it could send the New Zealand dollar go much higher. Jerome Powell was adamant the other day about how tight monetary policy was going to be going forward, and it seems as if the market has finally chosen to believe him again, at least for the time being.
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