The NZD/USD has rallied significantly during the trading session on Tuesday, to reach near the 0.57 level. However, we have seen a bit of risk appetite deterioration during the trading session, and it looks to me like we are going to continue to see the downtrend continue. After all, we have a lot of demand for US dollars out there over the longer term, and I think that is going to continue to be what we see. This is a market that I like fading rallies in, and there is nothing different on this chart.
The 0.55 level underneath has been significant support, and at this point I think we are trying to build up a bit of selling pressure, and therefore I think every time it rallies, you have to look at the New Zealand dollar as a potential sale. Furthermore, you are picking up “cheap US dollars”, and therefore it’s likely that we will continue to see people pay close attention to this situation.
On the other hand, if we break higher, the 0.58 area should be significant resistance. I believe that resistance will be difficult to break above, especially as the 50-Day EMA is going to be right around that same spot.
- I will be looking at this as an opportunity to get short again, and even if we break above there, I think we have to tangle with the 0.60 level to find even more resistance.
On the other hand, if we were to break down below the 0.55 level, it’s likely that the New Zealand dollar make a looking toward the $0.50 area, which will be the next major round figure. With the way people are worried about commodities and global growth right now, it would not be a huge surprise at all to see the New Zealand dollar get pounded to that level. Think of it this way: it wasn’t that long ago that the idea of the euro being worth less than the US dollar seemed ridiculous. Yet here we are.
- I like the idea of fading rallies going forward, but I think more than anything else were going to see consolidation with more of it downward tilt to it as there are far too many headwinds out there for the global economy.
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