- The New Zealand dollar stalls near key resistance against the US dollar, with the next breakout or rejection likely defining direction.
- Broader US dollar strength, risk appetite, and Federal Reserve policy remain critical drivers for the pair.
The New Zealand dollar initially tried to push higher against the US dollar on Friday, but you can see we are struggling near the crucial 0.58 level. We are at a major point of inflection, and I think the next move could dictate the next 200 points or so. The 200-day EMA sits just above and offers resistance as you would expect, and that I think offers a little bit of a ceiling in the market.
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Key Inflection Point Near the 200-Day EMA
However, if we were to break above the 200-day EMA, which is basically the 0.5830 level, then the New Zealand dollar is probably free to go looking to the 0.59 level. I do think there are concerns about stress in the financial system, and of course, the Federal Reserve is likely to be a little hesitant to start cutting rates rapidly like traders desperately need them to do in order to get back into the everything bubble.
And therefore, I think smaller currencies like the New Zealand dollar may struggle as they are driven by commodity and risk appetite parameters more than anything else. With that being said, this is a market that I think probably starts looking to drop toward the 50-day EMA if we see overall US dollar strength, which I do think is a very real possibility.
The US dollar will probably move in the same direction against most currencies, and the New Zealand dollar itself will not necessarily be unique in that fashion. In other words, watch what the greenback is doing against other currencies like the euro, the Australian dollar, and the British pound, as it could give you a little bit of a heads up as to whether or not we rise or fall in this particular pair.
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