- The New Zealand dollar initially rallied during the trading session on Monday, but has failed at the 0.58 level, showing signs of weakness.
- Ultimately, this is a market that's been in a downtrend for a while, especially now that the central bank in New Zealand has cut rates.
- And despite the fact that the Americans did the same, nobody seems to care. It's interesting that the U.S. dollar is starting to strengthen, mainly due to rising interest rates in the bond market.
But I think there's something bigger going on here. The New Zealand dollar is highly sensitive to Asia and therefore global growth. And ultimately, at this point, I think we've got a situation where there are a lot of concerns out there. And if that's going to continue to be the case, short term rallies almost certainly will be sold into. And I believe that the 0.5850 level is essentially a ceiling in the market right now, as it had significant resistance on the way up and significant support on the way back down.
I Still Favor Shorts Against the NZD
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Overall, I like shorting this market because on top of everything else, most brokers will pay you to hold it to the short side. As far as the target is concerned, a lot of this is going to come down to how the U.S. dollar behaves against everything, not just the New Zealand dollar. If we do start to see a run to the U.S. dollar, the 0.5550 level is roughly where I think we'll try to get to, but that doesn't mean we get there tomorrow.
If the market closes positively for the day, it shows that we're at least trying to find a floor, but the previous candlestick was a hammer. And now it looks like we're going to form an inverted hammer showing confusion. A little bit of rally with signs of exhaustion is what I would love to see, so I can start shorting yet again.
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