The NZD/USD pair has been selling off rapidly over the course of several months now, but during the Thursday session we found enough support to turn things back around and form a hammer. The 0.70 level of course is a large, round, psychologically significant number, and as a result buyers were of course attracted to this region. If we can break above the top the hammer, I believe that the market will reach the top of the recent consolidation area near the 0.72 level.
Because of this, I think that there is a short-term buying opportunity, but that’s about it. Ultimately, I think that we need to break well above the 0.72 level in order to hold on for any real significant move higher. On top of that, I think that the 0.73 level will be resistive. If we can get above there, I think that the market could really take off to the upside.
However, there is a selling scenario
If we can break down below the bottom of the hammer, I believe that the market will fall apart. We will then head to the 0.65 handle, which should be supportive as well based upon the large, round, psychologically significant number. That doesn’t mean it’ll happen overnight, but I think that eventually we will find that level.
It’s difficult to be excited about owning the New Zealand dollar, because it is so highly leveraged to the commodity markets. After all, the commodity markets are not necessarily looking very resilient at the moment, and with that it makes sense that the New Zealand dollar should continue to struggle over the longer term. However, it’s probably fair to say that we are a bit oversold at this point. With that being the case I think that it’s only a matter of time before the sellers come back into the market as they will see the US dollar has being “cheap.” Short-term buyer, longer-term seller unless of course something drastic happens.
