By: Mike Kulej
The New Zealand Dollar has been under a serious pressure lately. First, the devastating earthquake in Christchurch dimmed the country economic prospects, which was immediately reflected in its currency. That was followed by a suggestion that the interest rates will need to be cut in order to facilitate recovery from this disaster, which sent the NZD down even more.
Combined, these two events cause over 250 pips sell off in the NZD-USD in a span of a week. Currently the price is approaching 0.7350-0.7360 area, which could provide support, even if temporary, for the embattled currency.
Is it Enough?
This general level provided reaction in the price before. In mid December, the NZD-USD found a support here, while back in mid 2010 a strong resistance existed here. A solid example of a classic change of polarity principle. Since price areas of such importance often attract more and larger buy and sell orders, a reaction is very likely.
We can the same situation on a Three Line Break chart, which smoothes out the price considerably. It also suggests possible support here. Of course, both charts also agree, that if this level does not hold, the NZD-USD could fall down more, perhaps even under 0.7000.