- On Monday, we have seen the New Zealand dollar rally quite nicely against the US dollar, as we have broken above the 0.60 level.
- The 0.60 level is the beginning of massive resistance, and I think at this point in time we should be watching for either more momentum to the upside, or signs of exhaustion that we can start shorting. Quite frankly, when I look around the forex world, I can see that a lot of pairs look like this at the moment, that the US dollar may get eviscerated, or its oversold and it’s going to turn things around.
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When you are trading forex, if you get the idea of where the US dollar is going, overall, you will get the right direction of most pairs. This pair is a little bit different than some of the others and the fact that the New Zealand dollar has been a little bit more resilient during the day, but when you look at other currency such as the Australian dollar and the euro, you see that the US dollar is in fact fighting back. It is because of this that I think there is a potential trade setting up in this market, in both directions for that matter.
If we break out to the upside, then I think the New Zealand dollar goes looking to the 0.62 level above, which is an area that of course had been important previously. You would also see the US dollar lose ground against most other currencies, but right now when I look at those other currencies, they show signs of hesitation, and unless New Zealand itself makes a move due to some type of specific reason, I think it’s only a matter of time before the NZD/USD pair follows the other currencies.
If we break down below the 0.5950 level, then it’s likely that the New Zealand dollar starts to drop from there, perhaps looking toward the moving averages underneath, near the 0.5850 level. I do expect to see a little bit of volatility, and it is worth noting that the New Zealand dollar tends to be very noisy in comparison to some of the other major currencies.
Potential signal: if we break above the 0.6050 level on a daily close, then I would be a buyer of this pair, looking for a move to the 0.62 level, and setting my stop loss at the 0.5980 level. On the other hand, if we break down below the 0.5950 level, I’ll be looking for a move down to the 0.5850 level, with a stop loss at the 0.6005 level.
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