The NZD/USD pair had a fairly eventful session on Monday as we fell quite significantly during the day. However, there was quite a bit of a bounce and in fact the market formed a nice looking hammer at the bottom of what's been fairly consistent consolidation. The fact that the market chose to buying this pair of after it fell suggests to me that we are going to continue grinding sideways, and will eventually breakout to the upside. In other words, it's shown me that it simply doesn't want to fall.
Because of this, I am more than willing to start buying the kiwi dollar if we can get above the highest from the Monday ranges it would show a complete rejection of the sellers. If that's the case, to me obviously the 0.8450 level is the first target, but I also believe that a break above the 0.85 level would be more than likely at that point as well.
If we can get above the 0.85 level, we could see a significant run higher and possibly as high as parity in the long-term. With the rest of the world entering currency wars, is very likely that a small central bank like the RBNZ will have significant trouble fighting off the appreciation of its currency. This is especially true as the market for New Zealand dollars is a bit thinner than many of the other major currencies.
0.85 is the key
Again, if we can get above the 0.85 handle, I believe this pair becomes a buy-and-hold trade again. This pair likes to move suddenly and in a parabolic manner. It is because of this that one cannot be afraid to hold on to the trade through that whipsaws that common go. However, I believe that if you can hold onto this trade, you should be rewarded quite well as the currency wars heat up and the Federal Reserve shows how much eight it really has in those printers. In a lot of ways, I find it difficult to think of the Federal Reserve knows how to turn off the spigot. Even if they do, the economy and the United States seems to be getting a bit better, and this of course will drive up demand for commodities anyways which of course is always good for the New Zealand dollar also. It seems like a win-win proposition over the long-term for me.
