The bearish trend in the NZD/USD has taken on a swift downwards trajectory and values are now testing realms last seen in early May of this year.
- The NZD/USD exchange rate is near the 0.59270 ratio as of this writing. The currency pair is touching a price realm not seen since the first week of May.
- Selling in the NZD/USD has been strong and support levels have proven vulnerable.
- Traders wagering against the existing trend have likely walked away bruised from bets gone wrong.
- While it is tempting to believe the NZD/USD cannot go much lower, stepping in front of the train which has built up momentum is dangerous.
Economic data from New Zealand continues to be rather weak and recessionary concerns linger. The Reserve Bank of New Zealand will not be meeting until the 14th of August, when they are expected to cut their interest rate. In the meantime, NZD/USD has essentially nosedived since last Wednesday when the currency pair briefly retested the 0.61000 value. However, the high reached last week did not challenge the highs of the NZD/USD which had been seen in the week prior when the 0.61200 mark was consistently contested.
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NZD/USD Economic Considerations
The lowering of China’s interest rates earlier this week may have affected the New Zealand Dollar, China is New Zealand’s largest trading partner. Also New Zealand’s economic ties to Japan are important. However, the value of the New Zealand Dollar is still influenced largely by USD centric notions. Tomorrow the U.S will release its GDP numbers and if the growth figures are weaker than anticipated this could help spur buying of the NZD/USD.
Speculators who have been hurt by the trend lower in the NZD/USD who are still looking for a reversal higher will need to be patient. The momentum lower in the currency pair has been active and having climbed to the 0.60300 early on Monday, but to only incrementally lose value the past two days has simply reinforced the perception the NZD/USD has been weakened. Yet, those who believe some upside movement is bound to reignite may be rather curious about the current depths of the NZD/USD.
NZD/USD Dangers and the Need for Risk Management
The U.S economic data which includes tomorrow’s growth figures and the GDP Price Index, and on Friday will present inflation numbers via the PCE Price Index will be very important. The current trading realms of the NZD/USD do look oversold, but traders who are tempted to look for upside may find it difficult to time the market correct. U.S data will have to be weaker to significantly help NZD/USD optimism.
- Risk management and using conservative leverage will certainly be tools that are needed in the near-term when pursuing the NZD/USD.
- Traders may think the 0.59000 level is far too low for the currency pair, but a look at a six month chart shows depths of 0.58700 were tested in April.
NZD/USD Short Term Outlook:
Current Resistance: 0.059310
Current Support: 0.59205
High Target: 0.59720
Low Target: 0.59110
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