Potential signal:
- I am selling the NZD/USD with a stop of 0.5875 and a target of 0.5725.
The New Zealand Dollar tried to rally at the start of the session on Wednesday, as we continue to see the momentum play out. However, things could change.
NZD/USD
The New Zealand Dollar initially did try to rally a bit during the trading session here on Wednesday, testing the 200-day EMA, and it looks like we are starting to roll over. That does make a certain amount of sense that the market is starting to struggle at the 200-day EMA and the 61.8% Fibonacci retracement level. All things being equal, the interest rate differential still favors the US Dollar, and with those rates rising in America, this looks very much like a drop waiting to happen. Ultimately, the 50-day EMA underneath is a potential target, followed by the 0.5750 level.
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Federal Reserve Inflation Fight and Technical Levels
Recently, the New Zealand Central Bank has raised rates, and it is sounding a little bit more hawkish, but all things being equal, the Federal Reserve is more likely than not going to have to continue to combat the inflation out there. And that, I think, is the story here. We're in an area that's been important multiple times in the past, and I think ultimately, we'll have to make a bigger decision.
It is worth noting that short-term rallies will be sold into. Ultimately, if the market were to roll over from here, then I think this is getting an interesting look to it for a market that might offer a shorting opportunity. The exit, of course, would be very obvious with the 0.5870 level above offering a bit of a barrier.
Ultimately, this is a market that I think will continue to favor the US Dollar, maybe other safe assets. The New Zealand Dollar, of course, is a risk-on type of currency, and right now it does look like we are struggling.
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