By: Christopher Lewis
Kiwi dollar is one of the most favored commodity currencies for traders to speculate with. While the currency will often track close to the Aussie, the fact is the Kiwi is quite a bit less liquid than its cousin, and therefore will move much quicker on balance.
With this in mind, we have many of the world’s largest central banks currently printing money, or simply easing in general. The result is almost always the same: There will be a demand for “stuff” and commodities as people look to find things that store value much better than bits of paper with heads of state on them. The commodity trade is one of the easiest when you have easy money, and the Kiwi enjoys being heavily correlated to the world’s commodity markets.
This pair has seen a fairly large run since the end of last year, and as a result has got a lot of traders betting on one direction: up. The recent action certainly suggests that the world loves the Kiwi presently, and the fact that the yield is strong certainly won’t hurt its appeal either.
Consolidation
The area that the pair is currently trading in is a bit lofty, but it should be noted that we have had a straight march up since the middle of December. The pair certainly had to pullback, or at least slow down. There simply aren’t enough traders to continue pushing the pair higher at the moment, and as a result you get the sideways action that we have seen over the last few weeks.
.jpg "NZD/USD Daily 2/27/12")
The breaking of the 0.8450 area will push this currency pair much higher, and this is one of the signals I would use to get long. The bottom of this consolidation area can be found at 0.8250, and I would also consider buying supportive candles in that vicinity. However, there is always the chance that we breakdown, but this will more than likely find support at 0.82, 0.81, and most certainly at the massive support zone around the 0.80 handle. I am buying the Kiwi on a breakout, or a fall and supportive action at any of these levels. I will not sell until I see a sub-0.80 daily close.