NZD/USD Forecast: Heading for $0.65 Handle

• The NZD/USD has gone back and forth during the trading session on Wednesday, which is the same thing that we have seen on both Monday and Tuesday to see so much choppiness.
• The New Zealand dollar is currently hanging between the 50-Day EMA and the 200-Day EMA underneath.
• The market typically will constrict in this area, and then have an explosive move as we are between the moving averages and a lot of technical traders will be looking at this from both directions.

If we break down below the lows of the last couple of days, then it’s possible that we could go down to the 0.62 level. The 0.62 level underneath is a large, round, psychologically significant figure that has been important in the past, therefore we could see this market really start to fall apart if we break down below there. In that scenario, it’s likely that we could see a bit of a breakdown in the New Zealand dollar, perhaps sending this market all the way down to the 0.60 level. After that, then we could go looking to the 0.58 level which has previously been resistance.

Wait For Signs of Exhaustion

On the upside, if we were to break above the top of the candlestick for the trading session on Tuesday, they could open up a move back toward the 0.65 panels, an area that has been massive resistance. In that scenario, any signs of exhaustion will probably be jumped on, because it’s likely that we could see a lot of choppy behavior, but I do think at this point in time we will likely see a lot of negative pressure more than anything else, due to the fact that we have seen a lot of fear out there, which typically helps the US dollar.

A lot of back-and-forth behavior will more likely than not be the main driver of where we go next, but I think at this point as long as this continues, it will more likely than not favor the downside simply because whenever there is a lot of uncertainty and volatility, the US dollar tends to be an attractive asset to own. Because of this, I think you’ve got a situation where if you are cautious and wait for signs of exhaustion after short-term rallies, you may get an opportunity to short.