By: Christopher Lewis
The Kiwi dollar has been acting like someone shot it out of a cannon lately. It’s been straight up over the last month, and the pair has gained over 900 pips. Because of this, many traders simply didn’t get involved as it is easy to keep saying, “It has moved too far, too fast. I will catch it on a pullback.” Well, the Kiwi doesn’t always do that.
However, the recent run has been a bit much, even by Kiwi standards. Because of this, a lot of you out there have been ignoring this pair I am sure. The Kiwi has been strong against almost everything as well. All one has to do is look at the EUR/NZD, GBP/NZD, and NZD/JPY pairs to see this. (Not to mention what it has been doing to some of the minor currencies around the world.) Now that we have firmly established that the Kiwi is a currency the markets love at the moment, it then becomes a game of figuring out when we can get involved on the buy side.
The recent moves by various central banks are behind this move, albeit indirectly. The Federal Reserve promising to kill the Dollar, errr…..I mean keep rates at low levels until at least the end of 2014 insures that there will be a commodity rally as the central banks are in a fight to see who can kill their currency the quickest. With a run to commodities, we see Kiwi strength as per usual.
With the recent run, you certainly want to see this pair pullback if it is at all possible. Buying up here is something that only the truly reckless would do, and as a result I won’t. The daily candle that has formed from the Thursday session in a short shooting star, and although it isn’t the greatest shooting star I have ever seen, it makes me take notice as it could signal a pullback coming.
My plan is simple: Wait until after the Non-Farm Payroll report to see what the reaction is. I am hoping for a negative one to be honest. The main reason for this is twofold: It is against the obvious trend, and the support level at 0.8250 is pretty clear. It is the last high before the fall recently, and it also has a hammer sitting just under it. If I see a positive reaction to that level after a fall – I’m in.
NZD/USD Daily, Feb. 3, 2012