By: Mike Kulej
The past few weeks have been unkind to the commodity currencies – all of them lost ground following sell offs in metals and energy sectors. These currencies rebounded few days ago but are drifting down again and not just in relation to the US Dollar. They are getting weaker broadly.
The NZD-JPY is a good example of what the commodity currencies are doing. This pair had a strong rally, which ended at 66.70, followed by congestion and a breakout to the down side. The price found support at 62.53, advanced about 200 pips only to start sliding again.
Currently, the NZD-JPY looks ready to test the 62.53 support. At a little over 63.00, it is only about half of an average daily range away from there. Depending on volatility, that distance can be covered in matter of hours. How the price reacts at the support (if it gets there) will decide the next price swing.
With the MADC dropping under the zero line on the daily chart, the price should have a tendency to break through the trendline. That could be ominous for the NZD-JPY – there is no other defined support until around 55.00, which could suggest a serious sell off.