The NZD/USD pair had a fairly quiet session on Wednesday as most markets consolidated. The New Zealand dollar is a proxy for the commodity markets as far as Forex traders are concerned, and as such it isn't surprising that the day saw very little action. After all, the precious metals and grains all were relatively flat.
It currently looks as if the market is trying to find some type of support or base at the 0.82 handle. The hammer from the Tuesday session certainly suggests that there is support in the general vicinity, and as such I think the 0.82 handle does look interesting.
However, we have to be aware the fact that any type of knee-jerk or shock to the system could send this pair down much farther. After all, it is less liquid than the Australian dollar, and as such we see moves much quicker this pair than the Aussie.
0.82 and 0.80
For me, if the 0.8 2 gives way, we would be looking at a move down to 0.80. The move lower could be rather choppy though, and as such I'm not really that interested in shorting this pair. After all, the Federal Reserve will do what it takes in order to weaken the US dollar, and that means higher commodity prices in the end. This of course benefits all commodity currencies, and of course the New Zealand dollar will be no different.
The interest-rate differential alone is reason enough for some traders to be long of this pair, and as such you have to keep that in mind. Also, you have to understand that move has been relatively parabolic of the last two weeks, and a rest is needed. I currently believe that is what we are doing. In fact, a break above the Wednesday highs would be enough to get me buying this pair again. Obviously, I recognize the fact that a little bit more rest would be good for the trend, but this pair does tend to be very parabolic from time to time. In fact, if you go back and look at historical charts, it is not uncommon for this pair to suddenly take off for 500 pips at a time. Because of this, I am a little quicker to take along position and it than I would be another pair that had moved this high this quickly.