The NZD/USD pair had a very wild session on Thursday as the market both plunged, and then popped right back up in order to form a very long hammer. The 0.82 level offered support, and this would make sense as it was a spot where the market broke out from. Looking at this particular currency chart, I think that the New Zealand dollar should continue to do quite well against the US dollar, and this is especially true in the environment that the Federal Reserve is set up.
With the expanded quantitative easing, commodities in general should continue to get a boost from the weak US dollar, and as such commodity currencies such as the Kiwi dollar should continue to benefit. The interest-rate differential works in your favor as well, and a break above the highs from Friday would unleash the floodgates as it were.
Commodity currencies should be winners
Commodity currencies in general should do quite well against the US dollar, as long as the Federal Reserve continues to "step on the gas" when it comes to the economy. Since they essentially stated that the easing would be unlimited, this could run much longer than many people expect.
If there is some type of global economic crash, of course this pair would fall as it is a "risk on" market, but the truth of the matter is it looks like the central banks will do everything they can to avoid anything like this. We are in a marketplace where quantitative easing rules the day, and as such we are inflating the bubbles again. Whenever bubbles get inflated, it seems the commodities follow suit. The market loves cheap and easy money, in the interest-rate differential in this pair should continue to be a great benefit for the buyers.
The market looks very healthy, and the 0.82 handle offering support was classic technical analysis. This is a classic "what was once the ceiling is now the floor" type of move. Because of this, I am going to be long of this pair on a break of the Thursday highs.
