The NZD/USD pair broke higher during the beginning part of the month of January, but as you can see fell short at the 0.84 level. The market is currently sitting above the 0.8150 level, which is significant support. At the time of writing, the market looks like it’s trying to fall down though. As you can see on the chart attached, there is a monthly trend line that is below here, and it appears that we will more than likely break down and try to find it. This makes sense as I am seeing weakness with commodity currencies across the board, and US dollar strength, albeit minor.
The New Zealand dollar has been very difficult to trade for several months, and it is due to make some type of move. Although it doesn’t look like much, a move down to that trend line could be good for a couple of hundred pips. Move like that is a necessarily a long-term one, but when I am noticing is that the highs are getting lower so there’s also the possibility that we break down below that trend line. I would have to believe that would be on very bad global economic news though as the Kiwi dollar tends to be very sensitive to risk appetite.
China and the rest of Asia aren’t exactly helping either.
Lackluster growth in Asia of course isn’t going to help the New Zealand dollar either, as most of the exports from the islands head towards Asia and not the United States. With the United States having a little bit of a pickup in its economy, this should eventually spread towards Asia, and benefit the New Zealand dollar. However, to suggest that we pullback to this trend line isn’t exactly a stretch of the imagination, and well within what I would consider to be standard deviation of this market. With that, I believe that the month of February is going to see a softening of the New Zealand dollar, but I do not expect to see any type of major breakdown. The other scenario that I could see happening would be a continuation of the sideways grind with a downward bias.
