Potential signal:
- I am selling this pair under 0.57 with a stop of 0.5750 and a target of 0.5620 below.
- The New Zealand dollar rose on Friday but is showing signs of exhaustion.
NZD/USD
The New Zealand dollar rose initially during the trading session on Friday but gave back about half of the gains in what would have been very thin holiday trading. With that being the case, I think you have a situation where traders continue to look at the selling of the US dollar with skepticism, especially in terms of the New Zealand dollar, and with that, I also think that the longer-term downtrend is very much intact. I believe at this point in time, signs of exhaustion will get jumped on, and we will, in fact, continue to see a lot of volatility.
Top Regulated Brokers
In general, this is a market that, given enough time, will almost certainly favor the US dollar unless, of course, there is a true change in attitude. Despite the fact that we had a bit of a surprise in the non-farm payroll announcement, the reality is that we've seen a few anomalies here and there, and the US economy is certainly outperforming many others. If we do in fact see a recession in the United States, that would also be a reason to believe that the US dollar might strengthen before it's all said and done, just simply from the safety play.
Economic Headwinds and Technical Levels
New Zealand is facing a lot of headwinds, not the least of which is the fact that the economy has been slowing down, and of course, Asia itself is a bit of a mixed bag. I do believe that the fact that we ended up forming a bit of a shooting star on Friday is something worth paying attention to, despite the fact that there's not much in the way of liquidity at the moment, and I think part of what you have seen over the last day or two just simply has been short covering, and possibly even people covering their positions from weeks ago as we head into a 3-day weekend. Remember, the headlines have been wild as of late, so you never know what's going to happen.
By the start of Monday, I anticipate that we will probably see a continuation of the downtrend, but if we don't, then I'll be looking for the 0.5750 level and then the 0.58 level to offer resistance and a potential selling opportunity.
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