The New Zealand dollar tried to rally a bit during the early hours on Thursday but then turned around to show signs of exhaustion.
Furthermore, we are finding ourselves dropping towards the 200-day EMA, an area that I think a lot of people will be watching very closely.
If we were to break down below the 200-day EMA, it opens up the possibility of a drop to the 0.58 level, an area that has been very important for some time. Any bounce at this point in time is probably going to be a bit of a sucker's rally because there is so much in the way of risk concern out there, and therefore it makes sense that the US dollar is going to continue to be ran to for safety as the global economy has to deal with a massive potential expanding war breaking out in the Middle East.
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And of course, there are other reasons to short this market, not only due to that, but also the fact that the central bank in New Zealand is likely to be somewhat dovish. Any rally at this point in time I think looks suspicious, and I believe that the 0.60 level above is a bit of a ceiling.
Ultimately, the New Zealand dollar is a commodity currency, but it is also a currency that is definitely driven by risk appetite picking up. Really at this point in time, I just do not see that this is a market that can continue to attract big moves to the upside, and I do think eventually it will probably break down.
This has been a significant slump as of late, and I am looking for a way to take advantage of it. Breaking below the 0.58 level drops the market down another 100 pips to the 0.57 level and beyond. Quite frankly, it is difficult to get very aggressive with risk appetite right now and short-term rallies I think offer some.
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