The NZD/USD pair initially tried to rally during the course of the day on Wednesday, but found the 0.75 level to be a bit too resistive. We ended up pulling back and falling, and then to compound the misery for the New Zealand dollar, the Royal Bank of New Zealand issued a fairly dovish statement after the interest-rate decision. While they did not cut interest rates, they did suggest that perhaps the economy was a bit sluggish and with the FOMC stating earlier in the day that they were staying the course of walking out of quantitative easing, this of course creates more demand for the US dollar as the New Zealand dollar fell off.
The resulting candle of course tested the 0.73 level and at this point time I don’t see any reason why we won’t test the 0.70 handle as it is a large, round, psychologically significant number. Remember, the Royal Bank of New Zealand is looking to push the value of the Kiwi down to roughly 0.68, and it’s very likely they may get that now.
RBNZ to continue jawboning the Kiwi down.
I believe that the central bankers in Wellington will continue to jawbone the Kiwi down, and as a result I believe that they will eventually get that level. I think that every time this market rallies, you have to be looking to sell as the bankers suggested that a rate cut is actually possible.
Ultimately, I don’t see any reason whatsoever to buy this pair, and I believe that we will at least at the 0.70 level over the course of the next couple of weeks. Short-term traders will find this a nice selling market time and time again, as the Kiwi does tend to be a bit choppy, but ultimately I think that long-term traders will also profit as well. The question then becomes if we can get below the 0.70 handle, which at this point in time would not be that surprising. I am very bearish of the Kiwi at this point and have been telling most of my friends this for weeks.
