New Zealand dollar falls hard during week

The New Zealand dollar has broken down significantly during the week, reaching towards the 0.7050 level. I believe that the 0.70 level underneath will cause a little bit of support, but quite frankly we will probably break down below there and go looking towards the bottom of the longer-term consolidation area which is near the 0.68 handle. If we did somehow break down below the 0.68 handle, the market would probably break down rather significantly. I don’t think that’s going to happen though, I believe it’s only a matter of time before the buyers would be interested in the 0.68 handle.

With rising interest rates in the United States, it’s likely to be a situation where the US dollar climbs against most currencies. The New Zealand dollar course is highly sensitive to the overall risk appetite around the world, and higher interest rate seems to be a reason risk appetite might be grinding a bit lower. Ultimately, the market remains range bound, and I think at this point it’s showing that it’s willing to stay in that range. If we did breakdown below the 0.68 handle, it’s likely that we could go to the 0.65 handle after that. However, I don’t expect that in my base case scenario is that we get a week or 2 of negativity, and then a nice bounce that we can play. Perhaps using something like a stochastic oscillator as a signal my work as well. Ultimately, range bound trading makes for good profits if you can keep your position size small enough.