The New Zealand dollar rallied on Monday as the US dollar finds itself on its back foot for the day.
- That being said, I’m looking at this as a potential shorting opportunity.
- I will be very interested in selling the New Zealand dollar if we get anywhere near the 0.58 level.
- The 200-day EMA sits above there, and I think that could offer a bit of a barrier also.
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To the downside, I see the 0.57 level as the next logical step followed by 0.56. The New Zealand dollar of course is very sensitive to commodity markets, specifically soft commodities like dairy, but it’s also sensitive to Asia and this is considered to be a risk appetite based currency.
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So, if there are a lot of concerns out there about the politics moving money, then it makes sense that one would be quick to run from the New Zealand dollar, except for in this case the problem's in the United States. So, it’s somewhat of a paradox because in order to run to safety they’re running from the dollar.
Now, having said that, longer term, the Federal Reserve Chairman Jerome Powell will be in office until the end of his term anyway, so this really isn’t a thing. Whether you like it or not, the reality is that something coming out of this investigation and putting him on trial would be long after he leaves here in a few months. So, this may not really matter.
Furthermore, eventually the US dollar will pick up. It certainly looks like it’s trying to again against multiple currencies. The New Zealand dollar is a bit of an exception in that sense as it is at the top of its range for the day as I record this as opposed to many others that had shrunk a bit. We’ll just have to see, but if I see any signs of exhaustion at 0.58, I’m very interested in being short.
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