By: Christopher Lewis
The NZD/USD pair has been slowly grinding lower over the last couple of months. The pair overall has been bullish though, as the Kiwi is often used to play the economic growth story in the currency markets. The New Zealand economy is very export related so as the world’s markets see positive outlooks for the commerce of nations, this pair rises. Also, there is a positive swap on this pair as well – and that always helps in steady times.
The stock markets have risen over the last several months, no matter what the situation seems to be in reality. The situation in China is without a doubt the most important to this pair as well as it’s antipodean cousin the Aussie. The world has been debating whether or not the Chinese will have a soft or hard landing, and this will be the biggest factor in the future of this currency.
A confluence of support
The 200 day EMA is just under the current action, and this brings in the trend traders. The trend traders tend to be the “slow money”, and as a result don’t change their minds often. This helps these moves be somewhat self-fulfilling. The 0.80 level just below should also be a big support area as well, mainly because of the breakout nature of the move up, and the fact that it is a large round number as well.
.png "NZD/USD Daily 3/30/12")
The 0.80 level is in the middle of the 38.2% and 50% Fibonacci levels as well, so as a natural result we should have support. The recent action has been sideways after a fall, and it appears that the market is trying to figure out where it wants to go. Looking at the charts, it certainly looks as if the easiest path is going to be up as there are far too many reasons to think support could come into play as we fall. The hammer from the Thursday session implies that we may be seeing a slowdown of the bearishness as well. Because of this, I am willing to buy this pair on pullbacks still, and like the pair for a long. After all, this “fall” recently is still just to the 38.2% level.