The Kiwi dollar continues to look threatened on Monday, as traders are looking a bit “risk off” in the currency market.
NZD/USD
The New Zealand dollar fell again during trading on Monday as it looks like we are reaching toward the 0.57 level. The 0.57 level is an area that a lot of people will be watching very closely due to the fact that we have seen quite a bit of support in that region. If we were to break down below there, it could unwind the Kiwi dollar down to the 0.56 level, although I'll be the first person to admit that this will probably have more to do with bonds than anything else.
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If yields continue to climb in the United States, then we have a situation where not only the New Zealand dollar suffers, but it is more likely than not to open up weakness for all currencies against the US dollar. Rallies at this point in time, I think, are somewhat limited with the 0.58 level being a bit resistant.
Impact of Bond Yields and Resistance Barriers
It, after all, has a lot of market memory attached to it, with the level being a previous support level as well as resistance. I think a lot of traders will be watching that area closely. The only way I see that happening, though, is if yields in America drop, and of course, we see general US dollar weakness, and right now, I just don't see that happening with so many moving pieces.
After all, the Federal Reserve is likely to continue staying somewhat tight at this point, and if that ends up being the case, that makes a lot of sense that we would see the US dollar strengthen as other central banks around the world are essentially stuck with their monetary policy. The commodity situation is getting weaker, mainly due to the idea that inflation has peaked, so that could work against the Kiwi dollar as well.
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