The New Zealand dollar has been volatile on Friday, as traders are struggling with the next move due to multiple external factors.
NZD/USD
The New Zealand dollar continues to see a lot of noisy behavior during the trading session on Friday as we are hanging around the crucial 200-day EMA. The 200-day EMA is an indicator that a lot of people watch very closely, and it, for a lot of traders, defines the overall trend.
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The question, of course, is whether or not interest rates in America can continue to slip, because if they do, then it's possible that the New Zealand dollar can take off. All things being equal, though, we are at a significant Fibonacci retracement level in the form of 61.8%, and the 0.5850 level is an area that's been very important in the past as well.
Central Bank Policy and Macro Drivers
We've seen the New Zealand dollar take off to the upside after the Reserve Bank of New Zealand raised rates and gave us hints that perhaps they were going to continue to do so. That obviously is very bullish for a currency, but at the same time, despite the fact that we have had falling rates in the United States, it is still a positive swap to short this pair.
With that and the concerns coming out of the Middle East, it's possible that we could see traders running back to the US dollar. The forex markets aren't as simple as trading just the US dollar at the moment. It comes down to the specific currency that you're trading, and in this environment, in the New Zealand dollar, it is a bit of an outlier.
If this pair starts to fall, you will probably see the US dollar strengthen against many other currencies far beyond the New Zealand dollar.
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