By: Christopher Lewis
NZD/USD is a pair that a lot of traders have trouble with. It is probably because of the very nature of the pair. While some consider it a major pair, it is much less liquid than some of its peers as the nation of New Zealand is fairly small. Because of this, the pair will do nothing for quite some time, and then suddenly shoot straight up or down.
The recent action has been fairly impressive in the Kiwi as it continues to rise in value against the Dollar, even when the markets were so nervous recently. This is completely counterintuitive, as the Kiwi is often thought of as a “risk asset”. One of the main reasons people like the New Zealand dollar so much is the fact that the economy is healthy, and the currency offers a good yield, something which is lacking in the current environment around the world. (With the exception of risky bonds from risky countries. – see Greece, etc.)
The pair has continued to defy gravity, and in normal circumstances would be one of the least interesting to me. However, it appears that we are entering a phase in the markets that I didn’t think I would be able to say for a very long time – we are entering a bit of a carry trade. Granted, this one isn’t the same nature as the one that preceded the housing crisis, but it should be around for at least a little while.
Sign Of The Cross
The pair has recently broken above the all-important 0.80 level, and the market continues to grind higher over time. The fact that is hasn’t had many massively bullish days is actually quite impressive as it has been so steady. This will often show real strength. It’s not just “hot money” piling into the pair.
Currently, the pair sees a nice steady climb to elevated levels. The hammer that formed on Tuesday somewhat reminds me of the “Christ the Redeemer” status in Rio, as it shows strength from the top of the landscape. The very fact that the pair fell, only to bounce yet again after this rally shows real conviction, and as such is a very good sign. Add to that the fact that the 0.80 level isn’t that far below, and you have a recipe for continued bullishness. Because of this, I am willing to buy this pair on lower timeframe dips and more aggressively if we break above the top of the hammer from Tuesday. I wouldn’t consider selling this pair until we get a daily close well below the 0.80 level.
