- The NZD/USD has had a choppy trading session on Tuesday, as we continue to see a lot of questions about the overall risk appetite of traders.
- At this point, the US dollar has sold off quite drastically, even though rates have continued to rise.
- This tells me that the market is essentially trying to fight itself, so it’ll be interesting to see all this plays out.
Keep in mind that the New Zealand dollar is highly sensitive to the commodity markets, so at this point you need to pay close attention to the fact that commodities, although bullish as of late, are still very soft over the longer term. Furthermore, there are “stealth lockdowns” in China going on right now, and as a result, demand may drop from commodity producers such as New Zealand. Look at the chart, the 0.6050 level above is an area that I’m paying close attention to, as it previously had been supported. It’s worth noting that we peel away from the 0.60 level, which of course is a large, round, psychologically significant figure.
NZD Likely to Lose Ground
We are still very much in a downtrend, and we have seen a nice turnaround. Keep in mind that Thursday has the CPI numbers coming out of the United States, and that will have a major influence on what happens with the greenback, which of course has a major influence on what happens here. It’s worth noting that Asia itself has been struggling in general, and that has an outsize effect on the Kiwi dollar because they are so highly levered to those parts of the world.
If the Federal Reserve remains relatively tight, I think it’s going to be difficult for commodity currencies to truly take off. Yes, the US dollar was overbought so it does make a certain amount of sense that we have seen a bit of a pullback. Nonetheless, I think this is a scenario where you continue to see a lot of negativities over the longer term, but the occasional bear market rally will appear. At this point, I think we are very close to the end of the correction and resumption of the downtrend. If we were to break above the 0.62 level, then the train could change for quite some time.
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