The NZD/USD pair initially fell during the course the day on Friday but found enough support above the 0.6750 level to form a hammer. That being the case, the hammer signifies that possibly we will continue to go higher. After all, I have been watching the 0.6750 level as significant resistance, but on Wednesday we smashed right through that level like it wasn’t even there finally. On Thursday, we ended up forming a shooting star, and that of course is a very negative sign. I did not suggest that it was a selling opportunity though, and quite frankly Friday shows exactly why.
That being the case, the hammer that ended up forming on Friday suggests that the buyers are starting to come back into the marketplace, and the 0.6750 level should now offer support as it was so resistive in the past. That’s a basic tenet of technical analysis, and a technique that I used time and time again.
US dollar weakness
I believe that a lot of the move is based upon the US dollar, and not necessarily the New Zealand dollar. After all, the US dollar has been selling off against most currencies, and the New Zealand dollar of course has been absolutely pummeled over the last year or so. At this point in time, believe that we are going to go to the next large, round, psychologically significant number, the 0.70 handle.
I believe that the area will of course offer resistance, but now that we have broken above here, it would not surprise me at all to see that area broken as well. That’s not to say that we will do it in one shot, I don’t think that’s the case at all. If we grind sideways in the meantime, that might simply be the market trying to build up enough momentum to continue going higher. I think that’s what’s going to happen, and therefore I am bullish but cautious.
