- The NZD/USD initially tried to rally during the trading session on Friday but gave back gains as we have continued to see a lot of volatility.
- All things being equal, the market is likely to continue to see downward pressure of about 0.62, an area that has been important in the past, but the 200-Day EMA is probably a big driver as well.
- Ultimately, this is a situation where then you must take risk appetite into account as well.
If we break down below the hammer from the previous session, that could very well be a negative sign, and at that point in time I would anticipate that the market would probably drop down to the 0.60 level. Obviously, that’s a large, round, psychologically significant figure that would attract a lot of attention, so it’ll be interesting to see how things play out in that area. Furthermore, we also have the 50-Day EMA, which sits just below there and is trying to get up to that area as well. Brake control that could open the floodgates to the downside, as it would show a significant turnaround.
Waiting for a Pullback
You can also make an argument that a downtrend line sits right where we have pulled back from as well, so that could be another technical reason as we may see some selling pressure. The market will probably continue to be very noisy, but you should also keep in mind that this is in comparison to risk appetite in general. The New Zealand dollar is a commodity currency so that obviously has a lot to do with what happens in this market.
New Zealand is highly levered to Asia, but it’s also highly levered to the global demand for foodstuffs. The New Zealand currency is typically only bought in times of comfort or risk appetite, which is something that is very waning at times. At this point, we should have some type of pullback, because quite frankly I think we’ve gotten too far ahead of ourselves. At the very least, we need to see the markets work off some of the furs on the shot higher. We may have gotten a bit ahead of ourselves recently, and therefore I think the market will probably show that as the case.
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