By: Christopher Lewis
The NZD/USD pair has gone sideways for most of 2012. The pair is often sensitive to economic factors such growth in emerging markets, stock indices, and commodity prices. The pair is one of the favorites of traders when it comes to playing economic growth. The country is known for agricultural exports in general however the currency does follow the overall commodity markets as well.
The Kiwi dollar has a nice positive swap to it, so carry traders like it as well. While not the highest yielding pair, this is one of the advantages to holding it to the long side. The traders that have been waiting out this recent sideways market are getting paid a little bit every day. This is a natural lift for the pair, and as long as we don’t see massive bearishness on risk, should continue to keep the market a bit on the bid side.
Confluence
The area just below the market has many reasons to think that support should hold. The 0.80 handle is of course a major psychological round number, and will attract a lot of action if tested. The 200 day EMA is just below the current price, and has been holding the market up over the last few sessions as well. This should continue to weigh on the minds of trend traders who will often use it as a guide.
The 200 day EMA is now sitting at the 38.2% Fibonacci retracement level from the latest surge higher, and should continue to add to the buying pressure as well. Of course, just under the 0.80 handle is the 50% Fibonacci level as well, and that should be supportive.
.png "NZD/USD Daily 4/2/12")
The Friday action saw a shooting star form, which of course is bearish. However, we also saw a hammer form on Thursday as well, so it leads me to believe that the market wants to go sideways for the short-term. However, with all of the supportive elements just below, I prefer to buy the dips, with an expectation of going higher sooner or later. In the mean time, I can collect the swap at the end of the day.