The NZD/USD pair initially rallied during the session on Friday, but as you can see struggled to get above the 0.85 level with any gusto or significance. The resulting pullback formed a massive shooting star, and I now believe that this pair may be showing us that it wants to go lower. This candle is very negative looking, and it is at an area that was once a massive support area. Because of that, we are perhaps “retesting” the previous support level for resistance. So far, and looks as if that’s going to be the case.
A break below the 0.8450 level would signify that we could perhaps drop even farther. This would be confirmed underneath the 0.84 handle, which would essentially be a fresh, new low. With that, I would believe this market to be able to fall to the 0.80 handle, which is the next massive support area on the longer-term charts.
Watch risk appetites around the world, as it could determine where this pair goes.
Looking to risk appetite is often a nice way to figure out what’s going on with the New Zealand dollar. I think that the risk appetite in most European indices at the moment looks pretty strong, so perhaps watching the commodity markets might be a better way to go. Typically, they’ll tend to move in one direction or the other, but they can disassociate from each other. New Zealand has a commodity-based economy, as the export a lot of soft commodities, so that of course is to be watched as well.
Keep in mind that New Zealand is highly sensitive to the Asian economies, and demand out of that region. With that being the case, economic news out of that area could in fact sink the Kiwi dollar. Also, the US dollar looks as if it could be a little bit weak right now, which leads me to believe that the New Zealand dollar itself might be the problem. If you do not wish to trade this particular pair, perhaps looking around the Forex markets for what the New Zealand dollar is going in general might be the best way to go. There could be several trades shorting the Kiwi dollar this week in several different pairs.
