The NZD/CHF pair did very little during the course of the session on Wednesday, as we continue to find buyers just below. After all, the 0.65 level is a large, round, psychologically significant number, and with that it would of course attract a lot of traders. These areas of round numbers tend to be excellent places to find support and resistance, and with this being the case, the market is simply acting as it typically does.
Looking at the moving averages on the chart, you can see that we are not only seeing support based upon the large, round, psychologically significant number, but also the 50 day exponential moving average below crossing above the 100 day exponential moving average. We are currently cycling around the 200 day exponential moving average, and that of course is a huge moving average for longer-term traders. Now that we are essentially trying to break above there, most traders will look at this move as a trend change.
Switzerland
Quite frankly, I believe that this is more about Switzerland than anything else. The New Zealand dollar is of course highly leveraged to commodities, but at the end of the day I think that most of the focus in the market will be on the fact that Switzerland is so highly leveraged to the European Union. The Swiss National Bank continues to work against the value of the Swiss franc given enough time, and as a result this is more of an anti-CHF market than anything else.
That being said though, I also believe that Asia is probably more attractive than Europe at the moment, and with the Kiwi’s selling so many of their exports into the Asian theater, there is a little bit of a knock on effect. After all, Switzerland sends 85% of its exports into the European Union, and that is most certainly working against it as well.
I do not expect an explosive move to the upside, but a longer-term “buy-and-hold” type of carry trade might be possible as swap at the end of the day is of course positive, and it does appear that we have broken out to the upside.
