I recognize that the NZD/USD pair hasn’t really done much over the course of the last several sessions. However, we are below the 0.70 level, and the market looks fairly comfortable being down here. With that being said, I believe that it’s only a matter time before the break down. I have a couple of different scenarios in which I want to sell this pair, and quite frankly I don’t have one in which I want to buy it. I think the US dollar is a bit overvalued at this point, but just not against the New Zealand dollar itself.
I think that if we can break below the lows from last week, we will continue to grind our way down to the 0.68 level, which has some historical significance. I believe we go below there and hit the 0.65 level after that. On the other hand, we could rally from here, and I think that will only bring out the sellers somewhere near the 0.72 handle, if we can even get that high.
Selling rallies, selling breakdowns
I know it’s difficult and probably a bit foolish at times to have a “one-way mentality” when it comes to a currency pair, but quite frankly I just don’t see the reasoning for buying the New Zealand dollar now. After a surprise rate cut, a commodity market is very uneven to say the least, I have a hard time believing that the Kiwi will simply be a currency that somebody wants to own for any real significant amount of time.
With that being said, I think it’s only a matter of time before we break down but I do entertain the thought that eventually we will have to put in a longer-term bottom, it’s just nowhere near here or at the very least nowhere near this moment in time. I remain very bearish of this currency pair in the meantime. I think that most market participants will do the same.
