- In my daily analysis of the NZD/USD pair, it has become increasingly obvious that the US dollar continues to be the “preferred currency” of forex traders in general.
- Ultimately, this is a market that features a commodity currency in the form of the New Zealand dollar, and a reasonably smaller one than the US dollar.
- This does mean that volatility gets to be a little crazy at times, but right now it looks like we are in a scenario where we are trying to find some type of base for a potential bounce.
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All of this being said, the market is one that has to deal with the fact that interest rates in America continue to be stubbornly high, and inflation seems to be trying to rise again. With this, the market has found itself banging around the 0.5850 level, an area that previously had been massive support. Because of this, I think you have to look at this through the prism of technical analysis as well as fundamental analysis, and right now it looks like the technical analysis does suggest that we are going to perhaps see an attempt to turn things around, but we also have a lot of announcements this week that could change things.
This Week Could be Noisy
Keep in mind that this we could be very noisy, not only due to the fact that we are at extreme lows, but the fact that we get the Services PMI numbers on Wednesday, the weekly Unemployment Claims on Thursday, and then of course the Non-Farm Payroll announcement on Friday, which could really send the US dollar flying in one direction or the other.
Beyond that, we also have to keep in mind that the New Zealand dollar is highly sensitive to what’s going on in Asia, especially China. However, there are a lot of concerns about Asian growth at the moment, and that has been greatly influencing the fact that the New Zealand dollar has been dropping. Add to that the fact that the United States continues to outperform, this is a market that very well could see sellers coming into short this pair on signs of exhaustion after short-term rallies.
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