The NZD/USD pair fell hard during the session on Friday, and as a result it looks like the New Zealand dollar is going to face a little bit of selling pressure in the short-term. This market has been very difficult to trade recently, simply because we have been chopping around in a roughly 250 PIP range. I don’t know that any things change, but it does appear that commodity currencies in general are going to suffer in the short-term, and the New Zealand dollar of course will follow that general path. The Kiwi dollar tends to be very sensitive to commodities in general, and can be used as a gauge as to how commodity markets in general” feel.”
That being the case, I feel that this market is more than likely going to grind lower, aiming for the 0.8150 handle, an area that has been very supportive in the past. I see several support levels between here and there, so I think this will continue to be the theme of this market: choppiness.
Interest rate decision coming, will they raise them?
There is a lot of talk about the Reserve Bank of New Zealand raising rates fairly soon. Inflation has picked up a little bit in this country, and as a result we could see the New Zealand dollar get a sudden jolt higher. Nonetheless, I feel that the US dollar strength will probably be the most influential factor in this pair over the longer term. After all, there’s a lot more liquidity in the US dollars and the New Zealand dollar, no matter how the pair tends to act. There is a little bit of a “knock on” effect involving the US dollar and other currencies, and therefore if it starts to strengthen everywhere else, more than likely the interest-rate change in Wellington will be counteracted. Because of this, I will continue to sell rallies, especially in the short-term charts. The only way I would start buying this market is if we can break above the 0.84 handle on a daily close. And that scenario, I would not hesitate to start going long.
