If we break down below the 200-Day EMA, I suspect that there will be plenty of people willing to pick up New Zealand dollars down there, but a break down below the 0.61 level could lead to something much more negative.
- The NZD/USD has seen more momentum to the upside during the trading session on Thursday, clearing the 200-Day EMA.
- This is obviously a very bullish sign, so at this point, it looks like the New Zealand dollar may have further to go.
- This is exacerbated by the fact that the Reserve Bank of New Zealand recently hiked by 75 basis points and talked about inflation in their statement.
- On the other side of the equation, you have the FOMC Meeting Minutes which have some Federal Reserve board members suggesting that perhaps it’s time to start slowing down rate hikes.
Whether or not all that plays out remains to be seen, but right now must be stated that the New Zealand dollar seems much stronger than many other currencies. If we break down below the 200-Day EMA, I suspect that there will be plenty of people willing to pick up New Zealand dollars down there, but a break down below the 0.61 level could lead to something much more negative.
Pay Attention to Position Sizing
As things stand right now, I think a lot of this will come down to risk appetite as well, as the New Zealand dollar is “riskier” than the US dollar. Pay close attention to the interest rate situation and the net states, because of the turns around and starts going higher again, they could drive this pair lower. It’s worth noting that the Quincy candlestick was rather strong, so I do think there’s probably some follow-through coming. Whether or not we can break above the 0.65 level will be the question going forward, and if we do that could lead to something much bigger. In fact, we are starting to see a lot of questions asked of the US dollar globally, so if we can continue this, it’ll be interesting to see whether that happens.
Position sizing will be crucial because we still have not broken structure, which is at that 0.65 level, so I will be paying special attention to that because if it does break above there, at least in theory it could be a major trend change for a huge move. All things being equal, it will be interesting to see whether we can sustain that because quite frankly it seems like markets are still looking for cheap and easy money.