- The New Zealand dollar initially rallied on Tuesday but has failed just below the crucial 0.58 level. It is worth noting that this looks a lot like a topping pattern.
- I am not necessarily looking for huge moves here, but I do think that there is a real argument to be made for all of the issues that had worked against the New Zealand dollar still being there.
We did at one point test the 50% Fibonacci retracement level and then broke down. Now the question is: do we get any continuation? This is solely going to be in the hands of the US dollar itself, which has been stubbornly strong even though CPI numbers were a little cooler than anticipated during the trading session on Tuesday.
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The Global Shift Toward the US Dollar
If you look at the British pound and the Euro, the Canadian dollar, and even the Swiss franc, you start to see that money is moving toward the United States. New Zealand is highly levered to Asia and commodities, so we will have to see how that plays out. Right now, this looks like a market that could roll over.
New Zealand is different than Australia, even though their flags are awfully similar. You have to understand that this is more about demand for soft agricultural commodities, unlike Australia, which is driven by hard assets such as gold, copper, and iron. This is a different market and a market that probably continues to crumble against the US dollar much quicker than the Aussie dollar will.
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The 0.57 level underneath for me is very important because if we give that up to the downside, it is likely we go looking to 0.5650, maybe even as low as 0.56.
I am not calling for the end of the world here, but it does look like a very bearish topping pattern.
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