The New Zealand dollar has been choppy on Monday, as we are likely to continue to see a lot of confusion out there, with a lot of moving pieces.
NZD/USD
The New Zealand dollar has been choppy during the early part of the trading session on Monday as the 0.59 level is a large, round, psychologically significant figure that has been resistant over the last couple of weeks. But ultimately, this is a situation where we are simply going back and forth trying to determine whether or not we can continue to go higher after the surge from a couple of weeks ago. Interestingly, this is a market that continues to see a lot of situational awareness of the pressure to the upside with the 200-day EMA at the 0.5850 region offering support. To the upside, the 0.5950 level could be a bit of a target.
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Federal Reserve Rate Expectations and Economic Indicators
It'll be interesting to see how this plays out because a lot of questions are going on around the world about whether or not the Federal Reserve will raise rates in September. And we have CPI and PPI information coming out between now and then, as well as a jobs number that a lot of people will continue to see a lot of concerns about whether or not the Fed can raise rates. Right now, it looks like there is a 55% chance of a rate hike, so therefore it does put a little bit of a cap on the New Zealand dollar. But this will be a fluid situation over the next 6 weeks, and therefore a bit of hesitation here does make sense.
Furthermore, you have a lot of questions asked about the Middle East and the inflationary headwinds coming out of higher energy costs, which of course New Zealand's very sensitive to. So, with all of that being said, a little bit of sideways action after a shot higher makes sense. Breaking out of this little consolidation range we have been in for about a week and a half will give us a hint as to whether or not we are likely to go to 0.5950 or down to 0.58 below.
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