The New Zealand dollar gapped lower to kick off the trading session on Monday but then shot higher as we have seen quite a bit of momentum jump back into the market.
Ultimately, this is a market that I think will be watching very closely the idea of what's going on with interest rates in the United States.
The interest rates in the United States rallying is a sign that perhaps people are still concerned, despite the fact that the United States chose not to escalate the conflict in the Middle East, and in fact, the Iranians and Israelis have both stepped back, at least in the short term, from throwing missiles at each other.
The 200-day EMA sits at the 0.5866 level, and I think that is a bit of a ceiling for the NZD/USD pair, and ultimately, I think you see signs of selling in that area at the first signs of exhaustion.
Top Regulated Brokers
Supply Chain Sensitivity and Economic Outlook
But I don't even know if we will get there. If we break down below the 0.58 level, then the market is likely to continue to see selling pressure, perhaps down to the 0.57 level.
I don't like the New Zealand dollar overall because, quite frankly, it is far too sensitive to the idea of supply chains being destroyed, and of course, the idea that perhaps some of these countries, New Zealand included, are going to have major problems with energy going forward.
If that's going to be the case, the central bank in Wellington has no choice but to keep monetary policy loose because, quite frankly, they will need to stimulate the economy eventually.
That being said, even if rates were to rise in New Zealand, it's probably due to energy inflation at best. In other words, it's not a sign of strength.
Ultimately, I do think that the New Zealand dollar is probably primed to fall from here. But if we were to break above the 0.59 level, then you can start to make the argument that things are changing.
Ready to trade our Forex daily analysis and predictions? Check out the best forex brokers in New Zealand worth using.