By: Christopher Lewis
NZD/USD had a very bearish day on Monday as the pair broke below the 0.8250 level, a level that had been offering support over the last few weeks. The pair had been consolidating between the level and the 0.8450 mark in a fairly consistent and tight range. However, as the level broke down – I had no interest in selling.
There are a few different reasons to not bother, but one of them is that the central banks around the world continue with their cheap interest rate policies, and this almost always puts in a bid for commodities, as paper currencies on the whole will degenerate over time. There are certain exceptions however, and the most obvious ones are the “ComDolls”, or “Commodity Dollars.” This includes the New Zealand dollar, the Australian dollar, and the Canadian dollar.
With the Kiwi’s reasonably high interest rates, and the massive amounts of agricultural exports that the tiny nation produces, it makes sense that in an environment where fiat currencies are devaluing that the country’s currency will have a lot of demand. The longer-term charts also dictate that the uptrend is still very strong, and as such – I find this pair to be a “buy only” one currently.
0.80 and the “On/Off Switch”.
For me, the 0.80 level in this pair is vital. The area represents a significant break to the upside, and shows the true underlying strength in this pair. The level was the site of a large breakout, and maintaining it as support is crucial for me as far as wanting to own this pair.
The breakout does look weak at the moment, but in reality we have several possible support zones below the current market level. The 0.82 level is just a few pips below, and the fact that there was a hammer at that level gives the impression of possible support. Also, the 0.81 level has shown some signs of support and resistance in the past, albeit minor. However, I give minor S/R lines a lot more weight with the trend than countertrend. There should be no doubt that 0.81 as support is with the trend.
The big spot is at 0.80 in my mind. This level will be very difficult for the sellers to overtake, and because of this, I would be more than happy to buy supportive candles at that level. The supportive candle at any of those levels has me interested as the Kiwi simply looks as if it is on sale at the moment.