The NZD/USD pair has been gradually grinding sideways over the course of the last several weeks, and as a result I believe that this is a market that is trying to build up enough momentum to continue going higher. After all, when you look at the 0.85 level as a point of breakout, you can see that the market broke above it, and then pulled back to try to find support, something that’s often seen in classic technical analysis.
With that, I think that the market is going to eventually go higher, but it’s obvious we are not ready to go anywhere right this minute. During the month of May, I suspect that there will be plenty of buying opportunities from shorter-term charts. The question then becomes whether or not we can break above the 0.8750 level, the most recent high. If we can, I see absolutely no reason why this pair does in go to the 0.90 level over the course of time, and as a result I feel that this is more or less a “buy on the dips” market waiting to happen.
Remember commodity markets will matter, so will overall risk appetite.
Where the most important thing to remember about the New Zealand dollar is that it’s highly sensitive to commodity prices, and risk appetite in general. After all, people prefer to only US dollar in times of uncertainty than the Kiwi dollar. The interest rate differential cost favor the New Zealand dollar though, so quite frankly I feel that this market does ultimately go higher given enough time. However, as it isn’t one of the most liquid pairs out there, it’s quite common for this pair to have an impulsive move higher or lower, followed by a grind sideways as the market contemplates its next move.
The 0.85 level should continue to offer support, so I think that short-term traders will continue to buy this pair as we get close to the level, and then sell it once against the 0.87 handle. I think this will be done over and over again, and then finally we may breakout.
