Potential Signal:
the New Zealand dollar looks very much like a market that is going to continue to see buyers, and it could make a big move quickly. If we can break above the 0.6175 level, then I think you could be looking at a move to the 0.6350 level before it is all said and done. I would have a stop loss at 0.6115 underneath.
- The New Zealand dollar has rallied rather significantly during the course of the trading session on Monday, as we have reached the 0.6150 level.
- This is an area that has been very noisy in the past and I do think it makes a certain amount of sense that we would continue to see it as a significant barrier.
- That being said, we could go a little bit higher, perhaps reaching the 0.62 level, and it’s possible that the sellers would jump back into the market at that point.
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All things being equal, this is a market that looks very bullish to me and at this point it’s a little bit like a beach ball being held under water. We are at the surface now, so we will see what happens when people let go of the ball, because it may pop straight up in the air. If we were to break above the 0.62 level, that would be an extraordinarily bullish turn of events, perhaps opening the market to the 0.6350 level. However, that doesn’t necessarily mean that it’s going to be easy to overcome this barrier, but it certainly looks as if we are going to give it a shot.
Commodities
I think one thing that you need to pay close attention to is the commodities markets. The New Zealand dollar is obviously very sensitive to commodities, although unlike Australia they tend to focus more on soft commodities in this environment. Short-term pullbacks continue to be buying opportunities with the 200-Day moving average (EMA) underneath offering support near the 0.6075 level. I think at this point, there would be a lot of interest in buying this pair.
However, keep in mind that the US dollar is considered to be a safety currency, so it could very well get very strong very quickly if we get some type of major “risk off event” around the world. After all, geopolitics are certainly a fluid thing at the moment, but right now it looks like everybody’s banking on inflation, meaning that they are banking on commodities.
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