The NZD/USD pair initially tried to take off during the session after gapping lower for Monday, but as you can see the sellers stepped back into the marketplace and pushed it lower. Because of this, it appears that the New Zealand dollar is going to continue to struggle near the 0.75 handle, essentially making this a market that is “sell only.” I have no interest whatsoever in buying this market even if we do break above the 0.75 handle, because I believe it is more or less a “zone” of resistance all the way up to the 0.76 handle. With this, I believe that the sellers will continue to step into the market again and again, as the downward pressure is most certainly strong.
The shooting star of course is a very negative sign overall, and when it comes at the bottom of a significant drop, I cannot help but think that the downward pressure is going to continue and then the pair should start going to look for the next large support area, which I see as the large, round, psychologically significant handle of 0.70 as traders tend to like these round numbers.
Selling rallies
I believe that the proper way to approach this pair is to simply sell rallies as they occur, using the shorter-term charts as the way forward. I believe that the US dollar will continue to be the strongest currency in the world, and that will most certainly be the case against the New Zealand dollar as it is so highly leveraged to the commodity markets.
The Reserve Bank of New Zealand continues to push for a lower Kiwi dollar, and as a result the market should continue to try to aim for lower levels. The 0.68 level below is where they believe “fair value” lies, so that is more than likely where the market is going to aim for. I don’t know if we can break below the 0.70 level, but I cannot help but feel that the RBNZ will at least get basically what it is looking for.
