The NZD/USD pair initially fell during the session on Thursday, but as you can see we turned back around and formed a hammer. The hammer of course is a supportive looking candle, and as a result I think we will probably go higher. However, I think that the 0.70 level above is without a doubt massively resistive. If we can break above the top of the hammer for the session on Thursday, I believe that we will then head to the aforementioned 0.70 level where quite a bit of selling pressure should appear.
The 0.70 level of course is important, because of the psychological significance of the large, round number. However, with more important is the fact that it was once supportive. Now that it has been broken below, it should end up being resistance, and I believe that the resistance extends all the way up to the 0.72 handle. Because of this, I have no interest whatsoever in buying this market, as I believe there is a massive amount of noise above.
Look for value
I think the best thing you can do in this market is look for value. In other words, when this pair rises, it makes the US dollar “cheap.” After all, the New Zealand dollar is highly leveraged to the Asian economy, which of course isn’t exactly strong. Demand for commodities will of course affect the value of the New Zealand dollar as well, and as a result I feel that the New Zealand dollar will continue to be fairly soft over the longer term. On top of that, I believe that the surprise interest-rate cut will way upon investors’ minds around the world. In other words, it’s going to be much easier to own the US dollar than the New Zealand dollar in general.
It’s not until we get above the 0.72 level that I would consider buying this pair. However, I think if we show any signs resistance it’s a great selling opportunity. I believe that the 0.68 level of course is important based upon historical charts, but ultimately we should then head to the 0.65 handle.
