By: Christopher Lewis
The NZD/USD pair has recently been bullish. In fact, the pair has been for a couple of months when compared to the other commodity related currencies. This is most obvious when compared to the Aussie dollar, as that currency fell hard over the last couple of weeks while this one went sideways. While it’s not necessarily a gain, the fact is that the lack of devaluing says one thing to me: The Kiwi is far stronger then the Aussie, and that’s important information as the two typically move in the same way.
The Kiwi is a commodity currency, but is often used as a “general” one. Unlike its antipodean cousin the Aussie, it doesn’t follow the copper and gold markets, but rather the general “feel” of the futures pits. If it had to be tracked to anything in particular, it would have to be agriculture as the island nation exports a lot of wool, beef, and milk.
Triangle Breakout and Retest?
The recent action has seen the Kiwi shoot straight up, breaking through a nice triangle on Thursday, only to fall hard on Friday. However, the fall on Friday was more of a general “risk aversion” move than anything directly related to the Kiwi itself. The move on Friday did stop just at the top of the triangle, so the next move will be very interesting as it could be a class technical analysis set up. When these shapes get broken, they will often be retested for support, much like support and resistance lines.
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If the pair can hold the area, I will go long as the measurement of the triangle’s height suggests that the market could move to the 0.8450 level – the recent highs. If not, there are plenty of other things that could be supportive below as well. The 200 day exponential moving average, the 38.2% Fibonacci retracement level, and the 0.80 level all come to mind. Because of this, I know I will be going long – I just need to see support at one of these places. Selling isn’t even a thought right now.