The NZD/USD pair initially fell during the course of the day on Thursday, but found enough support near the 0.7550 reason to turn things back around completely, and form a nice-looking hammer. This hammer of course is very bullish, and I believe that we may have a short-term rally. If we can break the top of the hammer, it would make sense to head back to the 0.77 handle, but longer-term I am a bit suspicious of the New Zealand dollar. After all, most of the commodity markets out there look very soft, with perhaps the lone exception being petroleum. The New Zealand dollar is very sensitive to commodity markets, and New Zealand has absolutely nothing to do with the petroleum industry. With this, it makes no sense for the Kiwi dollar to go higher for any real significant amount of time.
Buying short-term, selling longer-term?
As things stand right now, I think that we could probably see as short-term buying opportunity. However, I think that longer-term this pair is going to break down. If we break down below the bottom of the hammer however, I would begin to sell right away as it should be very negative. There is a bit of an argument for a rising wedge in this chart, and if that ends up being the case, and we break down below the bottom of the hammer, that’s a very negative sign and we should probably head back down to the very lows near the 0.72 handle.
I have to admit though, I don’t necessarily like the rising wedge pattern, because it is one of the least reliable ones in my opinion. However, it would just leave more credence to the idea of selling as a break down below the bottom of the hammer in what is a longer-term downtrend is reason enough for me to start selling. Keeping that in mind, the next session or two ought to be fairly interesting.
