- During the trading session on Thursday, the New Zealand dollar initially dipped ever so slightly, just to see a bit of buying on the dip in order to send it higher.
- All things being equal, this is a market that looks like it is hell-bent on reaching the 0.60 level.
- The 0.60 level is an area that is a large, round, psychologically significant figure, but it’s also an area that has shown a lot of interest from traders in the past.
- In other words, I would anticipate that there should be a lot of “market memory” in this region, especially as the market is overbought by just about any metric that I can think of.
Risk Appetite
Ironically, the US dollar has been struggling in a time that normally would see a lot of US dollar buying due to a lack of risk appetite. Nonetheless, I think you have a situation where the bond market is dictating a lot of what is going on, as guilds have rallied, as people are pulling money out of the bond market in order to hold US dollars. In an odd correlation, we could very well see higher yields make the US dollar weekend, as people are trying to protect their accounts, as well as large sovereign wealth funds trying to protect their portfolios.
Regardless, a move like this normally sees a vicious pullback, so it is only a matter of time before we do in fact see that happen. However, it’s very difficult to time something like this, but I do think that the 0.60 level could be a likely candidate for traders to start to try to short this market. Ultimately, I believe that we have a situation where traders will continue to be very erratic, but at this point in time I find it very difficult to chase this trade to the upside. That doesn’t necessarily mean it’s time to start shorting, but if we do see a lot of exhaustion near the 0.60 level, then you might be able to convince me to start shorting the New Zealand dollar.
Ready to trade our daily Forex analysis? Here’s a list of the brokers for forex trading in New Zealand to choose from.
