The New Zealand dollar is noisy again on Monday, as we continue to see this area offer resistance.
NZD/USD
The New Zealand dollar is somewhat noisy but positive during the trading session here so far on Monday. But you can see we continue to see a lot of noise right around that 0.5850 level. The market is hanging around the 200-day EMA indicator that a lot of people will be watching very closely.
The market continues to see a lot of questions asked about risk appetite, and that could end up working against the value of the New Zealand dollar, as of course the US dollar is considered to be a safe currency. We also have recently tested the 61.8% Fibonacci retracement level, which is that area where we see a lot of noise. So, in general, I think you have to believe this is a market that, given enough time, will have to make a bigger decision.
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And we had gotten a little overbought, so to see a bit of hesitation here and a little bit of resistance makes sense, especially as these rates in America continue to climb. As long as that's going to be a danger out there, I think you have a situation where the New Zealand dollar, although positive, probably has somewhat limited upside potential at the moment.
I do like the US dollar longer term, but I also recognize that we have a lot of questions out there when it comes to inflation and, quite frankly, exactly what people are going to be doing later this year as far as central banks are concerned. There is still talk of New Zealand being a little bit more hawkish than most other central banks, so that might be something to pay attention to.
But really, I think you have to also believe that this is a market that will be watching the headline risk coming out of the Middle East, inflation, that type of thing, which will have a direct impact on people chasing dollars, especially if inflation starts getting priced into the bond market. I'm a little bit neutral here. We'll have to wait and see. I think we will get an answer soon.
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