The NZD/JPY pair broke down during the course of the session on Wednesday, clearing the bottom of the shooting star from the Tuesday session. This is a classic technical analysis sell signal, and as a result I feel that this market is probably going to head down to the 80.80 handle. It’s probably only a matter of time before we break down below there as well, and as a result I feel that this market should probably reach towards 80 as it is a “large, round, and psychologically significant number.”
The New Zealand dollar is of course highly leveraged to the commodity markets in general, as the New Zealand economy is highly agricultural. While most Forex traders do not trade the New Zealand dollar in relation to agricultural commodity such as milk and cattle, the reality is most of us will trade it in relation to overall “attitude” of commodity markets. In this sense, even oil can have an effect on the New Zealand dollar.
Selling rallies on short-term charts
I am selling short-term rallies on short-term charts going forward as I believe we will break down eventually. The Royal Bank of New Zealand is expected to cut interest rates during the session today, and as a result it could send this market lower. On top of that, you have to keep in mind that there is a certain amount of anticipation of this, so volatility could be a major factor. Ultimately though, it is probably the rate statement that will move this market more than anything else. If it suggests that the RBNZ may cut rates even further, there is possibility of more downward pressure in a market that is already pretty beaten down.
Ultimately, I believe that this market will find support, but I just don’t see it happening right now. With this, I remain short of this market until we get at least to the 80 handle, and it would not surprise me at all if we fell all the way to the 75 handle, especially if Wellington suggests that they are not done cutting.