The New Zealand dollar sees a lot of weigh around its neck at the moment, as we are sitting on a massive support level.
NZDUSD
The New Zealand dollar has been very noisy during trading on Tuesday as we continue to move on the latest headlines coming out of the Middle East. Quite frankly, there is enough fear out there to keep the US dollar somewhat bid, but the interest rate market has been all over the place in the United States and that has led to a little bit of hesitation in US dollar buying over the last couple of hours.
The market continues to look at the 0.57 level as an area of importance, which of course has been multiple times in the past, so market memory is certainly becoming to be a major part of the focus of traders.
Risk Appetite and Market Sensitivity
I think given enough time we probably have a situation where traders will be looking to take advantage of any type of selling opportunity after a rally. After all, the market has been very bearish for the New Zealand dollar for some time, and I just don't think that changes overnight.
The Central Bank in New Zealand is one of the few banks around the world that has been actively dovish, and I think that continues to weigh upon the Kiwi dollar. Not to mention the fact that there are concerns about global trade in general, and if you cannot get your goods to other countries, the situation becomes pretty dire pretty quickly.
With this, I think you have to understand that New Zealand is unique in the sense that it is just a few weeks away from potentially running out of fuel. This would be disastrous for their economy, so I think it is a pretty high bar to cross in order to feel comfortable investing in New Zealand at the moment. The interest rate differential does not favor the Kiwi and therefore I think you continue to see a lot of selling pressure here given the fact that there is so much uncertainty.