The NZD/USD pair broke down during the session on Friday, as the jobs number out of the United States came out much better than anticipated. This of course had money flowing into the US dollar in general, so it’s not a big surprise of this pair would fall. On top of that, quite a bit of money flew out of the commodity markets, driving down prices and increasing bearishness when it comes to commodities in general. Ultimately, this causes a lot of problems for the New Zealand dollar, which of course is highly correlated to commodity markets in general. Ultimately, this market should continue to go lower, and the fact that we broke down below the 0.74 level is significantly bearish enough to have me selling rallies as they appear.
I believe that it’s only a matter time before we break down to the 0.7150 level, which of course was the recent low. I think that any time we rally, it will simply represent value in the US dollar that we should take advantage of. I think that it’s only a matter of time before we not only get down to the 0.7150 level, but also break down below there, as the Royal Bank of New Zealand continues to state that fair value in this market is closer to the 0.68 handle.
Continued weakness.
I believe that we will have continued weakness in this pair, as the market continues to shun anything but the US dollar. The fact that we closed at the very bottom of the range of course suggests that we will have follow through on Monday, and that of course should be enough to push this pair below the 0.73 handle given enough time. I also believe that the commodity markets will do no favors for the New Zealand dollar, and because of that, we should continue to see a lot of weakness.
The 0.7650 level above is still resistance as far as I can see, so I would be more than willing to sell this market on a resistant candle in that general vicinity.
