- The NZD/USD has been very noisy during the trading session on Thursday, as the US dollar has been all over the place.
- This does make a certain amount of sense considering that there’s a lot of uncertainty out there, and of course, central banks around the world are starting to suggest that they may slow down their monetary hiking policy.
- The one that has not been commented on so far has been the Federal Reserve, which of course is the most important central bank globally.
New Zealand has a lot of external factors that must worry about as well, as it is a commodity market. It’s merely agricultural, but it does suffer from lack of demand at times in Asia, which is the number one destination for most of its products. Keep in mind that the 50-Day EMA is a widely followed technical indicator, and now that the ECB is out of the way, people may start to focus on GDP numbers coming out of America, which by the way were hotter than anticipated on Thursday. This has people thinking that perhaps the Federal Reserve may have to stay tight for longer than they wished.
Federal Reserve Eventually Will Hike Aggressively
The Federal Reserve has a meeting next week that runs on Tuesday and Wednesday and will give a monetary policy statement on Wednesday. They are expected to rise by 75 basis points, although some on Wall Street are suspecting that it’s only going to be 50. This has been a major problem for the markets because they continue to show a lot of volatility based on hope and optimism. Ultimately, it’s a credibility issue and I do believe that the Federal Reserve will eventually have to hike aggressively, not only since they have been stating so for so long, but also since inflation is still very sticky in the United States.
With, if we were to break down below the bottom of the candlestick for the Thursday session, I think you’ve got a real possibility of the market breaking down rather hard. The alternate scenario of course is that we break above the top of the candlestick for the Thursday session, allowing the New Zealand dollar to target the 0.60 level above, which is a large, round, psychologically significant figure, and therefore makes another area where you would expect to see pushback.
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