The NZD/USD pair went back and forth during the course of the day on Thursday, as we continue to show significant support just below the trading area that we are and at the moment. The 0.84 level for me is the bottom of the larger consolidation area, with the breaking below of that level as a very negative sign for the New Zealand dollar itself. With that being the case, the market should continue to find support in this general vicinity, so therefore I feel that the short-term pullbacks should continue to offer buying opportunities going forward.
I believe that the market will eventually go to the 0.88 level, but that doesn’t necessarily mean that it’s going to be easy to do so. This is a market that of course has sold off rather drastically, so having said that it’s difficult to imagine that the market is simply going to spring higher from here just as ferociously as it fell. We will be climbing a “wall of worry”, and as a result it’s very likely that the market will offer us plenty of buying opportunities on dips and therefore it could be a market that you go back to time and time again.
The New Zealand dollar is highly correlated to risk.
The New Zealand dollar of course is highly correlated to risk, as it is tied to the commodity markets, plus New Zealand is a bit of a “riskier” economy. With that being the case, it should also be noted that New Zealand is often the agricultural supplier to Asia, so of course is highly tied to Asian economies as well.
If we did break down below the 0.84 level for a daily close, I think that the market would then head to the 0.8250 level first, and then the 0.80 level which of course is a large, round, psychologically significant number where I would expect quite a bit of support. Just as I would buy dips on a move higher, on a break down below the aforementioned 0.84 level, I would be sellers of short-term rallies.
