The Kiwi dollar is one of my most favored ways to play the risk appetite of the markets on the whole. For example, when the stock markets around the world are happy and rising, this pair normally does quite well. Most traders use the Aussie as their expressive vehicle, but I prefer this pair for the exact reason that most traders don’t like it – the Kiwi market is much less liquid than the Aussie.
By being a smaller market, the moves are more exaggerated, and the momentum can really take off. This allows for better gains for the money. However, there are also times when the market moves quickly against those who are looking for yield and to take on risk as well. This is one of those times, and the pair has fallen quite hard as a result.
The candle for the Tuesday session looks absolutely brutal, and there is nothing at this point that even looks remotely hopeful for the bulls. The candle is closing at the very bottom of the range, and this suggests that we are going lower.
Rugby World Cup is over
One of the things that have had the Kiwi so sought after in relation was the fact that retail sales had been better in New Zealand than Australia over the last several months. However, there was the little point of the Rugby World Cup bringing thousands of people into the country looking to spend money. Now that they are gone, the numbers are dropping that come out of Wellington.
The 0.80 level giving way a week or so ago also signals a real shift in this pair. However, we have fallen quite hard, and it must be mentioned that the pair is probably a bit oversold at this point. Although I know selling is the only way to go, I need to see a bounce to sell as the market is probably a bit overextended.
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I certainly see no reason to buy this currency at this point as the global economy looks set to decline overall. Also, as the world runs to the US dollar, we will see commodities fall in value and the Kiwi is higher correlated to them. In short, the “risk off” attitude of traders has me selling rallies as they fail all the way up until we close above the 0.80 mark on a daily chart.