The NZD/USD pair rose during the session on Wednesday, finally breaking clear of any and all resistance just above the 0.85 level. This represents a significant breakout as far as we are concerned, and we look at the overall market has been a massive consolidation area between the 0.85 and the 0.75 levels. If the market respects that basic technical analysis, this move could go as high as 0.95 before it's all said and done. Needless to say, I started by New Zealand dollars on Wednesday.
This market could pullback however, as will quite often happen on a breakout. However, I fully expect the 0.85 level would be supportive, and therefore will be concerned about the market until we close well below that. I see that there will be a bout of messiness above, but quite frankly on the longer-term charts there isn't much between here and much, much higher prices.
Going forward, I fully expect the "risk on" trade to continue as traders by the New Zealand dollar looking for yield. After all, the Federal Reserve continues to crank up the printing presses and buy treasury bonds in the United States, keep in the yields drastically low. This is a simple old-fashioned carry trade type of play, something that we haven't seen much of over the last couple of years.
Commodities
Commodities of course could have a massive effect on the New Zealand dollar as well. What is interesting is that while commodities have been falling in Dollar denominated terms, they've been going up in many other currencies. In other words, we may see some inflation from time to time in other parts of the world.
As agricultural commodities do better, so is the New Zealand dollar as a common correlation. This doesn't mean it has to; just simply that agricultural strength will certainly help. All things being said though, this pair is broken out, and that is all you need to know. This is one of those chart for you simply try not to worry about too much as to the "why" of the trade, but rather the "what."
