The New Zealand dollar breaks apart during session on Tuesday

The New Zealand dollar broke down rather hard during the trading session on Tuesday, partly in reaction to poor retail sales numbers coming out of Australia, as the Aussie dollar in the New Zealand dollar tend to move congruently. The market looks likely to continue to offer a major amount of resistance in the form of the 0.70 level, an area that was massive support in the past. Now that we have done this, I think the market will probably sell off in the short-term rally that show signs of exhaustion, as the US dollar continues to be a major beneficiary of higher interest rates in America, and of course the fact that so many of the central banks around the world are not looking to raise interest rates anytime soon. Because of this, I believe the greenback continues to be the strongest currency through the summer, and the 0.68 level being such a major support level in the past, I think it’s likely that we will need to go down there to test that level to see if we can hold. If it breaks down, the market could unwind rather drastically, perhaps even to the 0.65 handle. However, in the short term I think the 0.68 level makes a nice target.

Rallies at this point would need to break above the 0.71 level to be convincing, and I think that every time you rally in this market, you need to be looking for signs of exhaustion to take advantage of what has been an extraordinarily negative trend.