Potential signal(s):
- I am a seller on a break below 0.5840 with a stop of 0.59, and a target of 0.5715.
- I am a buyer on a break above the 0.59 level, with a stop loss at 0.5860, and a target of 0.5960 above.
- The New Zealand dollar has fallen against the US dollar on Wednesday, as the market continues to consolidate in general.
NZD/USD
The New Zealand dollar has fallen a bit during the trading session here on Wednesday despite the fact that the CPI number came in as expected. Part of this is probably the softer jobs number coming out of New Zealand earlier, and that puts a little bit more doubt into the idea that the RBNZ will be hiking rates, although I think most traders still believe they will. But at the same time, most traders believe that the Federal Reserve is likely to hike rates, so that keeps it somewhat neutral.
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Technical Consolidation and Carry Dynamics
The market has been forming a bit of a bullish flag or pennant. We'll have to see if it ever breaks out. Right now, I think this is one that's worth watching because it gives you a clear consolidation area that, if we can break out of it, then you have a momentum-defining moment. If we break to the upside, the measured move could be for just above the 0.5950 level, maybe a little closer to the 0.60 level. If we break down below here, it could open up the possibility of a move down to the 0.5750 level.
We are currently in a bit of a holding pattern, but that's not a huge surprise considering that the markets are still very concerned about the situation in the Strait of Hormuz, which has a major influence on interest rates around the world. While the interest rates in America did drop slightly during the trading session, they are still relatively elevated, and there is still a positive carry for holding the US dollar against the New Zealand dollar, going short here.
So, I'm still watching this. I look at this as a chart that's starting to compress, and then eventually, once we get that momentum, I'll be trading right along with wherever it breaks out to.
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