The New Zealand dollar has jumped enough to reach the 0.60 level on Wednesday, as it takes advantage of US dollar weakness.
NEW ZEALAND DOLLAR
The New Zealand dollar rallied to kick off the trading session on Wednesday, testing the crucial 0.60 level before it was all said and done. Ultimately, this is a large round psychologically significant figure that I think a lot of people will be paying close attention to. If we were to break above the 0.60 level, then it opens up a move to the 0.6050 level.
Even if we do that, we are still in the midst of consolidation. I think ultimately you have to believe that this is a market that will move with the fortunes of the US dollar, which of course have been fairly poor during the session, but we'll have to wait and see whether or not the New Zealand dollar truly can break down from here. After all, the New Zealand dollar is one of the weaker performing currencies against the greenback over the last several months, despite the fact that it's rallied.
Exhaustion as a Selling Opportunity
We also have to keep in mind that the Reserve Bank of New Zealand has made it clear that they will probably remain dovish for a moment. Ultimately, I think you will see a certain amount of exhaustion, and that exhaustion probably ends up being a selling opportunity.
Ultimately, it's not until we break above the 0.61 level that the market would go much higher. At that point, we probably are looking at the 0.6250 level. Keep in mind that the New Zealand dollar is a currency that is highly sensitive to Asia and of course everything to do with Asian growth, but it also has to do more or less with agricultural.
So, it's a little bit different than Australia. It generally follows the same trajectory, but we do see a little bit of a divergence between Australia and New Zealand at the moment, and therefore this is the weaker option of the two to play against the US dollar.