The NZD/USD pair fell initially during the session on Tuesday, testing the 0.84 level. This area has been supportive in the past, and it does not surprise me that we formed a hammer for the day showing more support as well. With that, the market looks ready to bounce considering that the hammer looks so perfect and is certainly place right at the perfect area.
With that, I believe that this market will bounce and head towards the 0.8550 level first, and then ultimately the 0.88 handle. This will coincide with risk appetite around the world, so if we can get a relatively positive trading session today, the New Zealand dollar should benefit as it tends to be bought when times are good. On the other hand, it sells off when times are bad. With that, we have to pay attention to what’s going on around the world and when trading this particular market.
Watch the stock markets.
I personally will be watching the Nikkei, the DAX, and the FTSE for guidance. That being said, if those all look fairly decent, I am willing to buy this market. Besides, there is a significant risk to reward ratio with this trade, so quite frankly even if I lost, I think that it’s worth it. Designs, if we break down below the 0.84 handle, I think that the market goes down to the 0.80 level, and therefore gives me more than enough room to move and recapture any losses from going long.
With that being the case, I believe that a break above the top of the hammer sends this market higher, although it’s going to be very difficult to hang onto the trade as it should continue to chop around even though we would be simply hang about in the previous consolidation area, something that’s very typical for summertime trading. I certainly would be surprised to see short-term traders come back the markets on and off, making conditions difficult but perhaps with a bit of an upward bias.
