The New Zealand dollar continues to try to rally, but it just can’t seem to hang onto those gains.
At this point, I am looking to short this pair.
The New Zealand dollar has seen a lot of choppiness during the trading session on Wednesday, as we continue to see this market watch interest rates very closely. The US 10-year yield is starting to rise a bit late on Wednesday, so we'll have to see how this plays out, but I'm personally watching the 0.58 level.
If the NZD/USD pair breaks down below that level, then I think the New Zealand dollar probably drops to the 0.57 level, assuming that the US dollar continues to strengthen. To the upside, we have the 200-day EMA at the 0.5865 level, an area that I think is your ceiling. All things being equal, this is a market that I think if we continue to see a lot of volatility and negativity, then the market will obviously favor the US dollar over most currencies.
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And New Zealand is a problematic commodity currency because not only are you exposed to Asia, but you also have to worry about supply chain issues. After all, New Zealand is struggling with oil and energy supply. If that does in fact really start to pick up, then you would have major problems with the New Zealand economy.
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Nonetheless, the New Zealand dollar has been weak for a while, and the New Zealand Central Bank is fairly dovish to begin with, so falling makes sense regardless. I like fading short-term rallies. I like selling below the 0.58 level on a daily close. We'll just have to see how this plays out because that was a bit of a perfect shooting star from the Tuesday session. Let's see if we get any follow-through here.
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