- The New Zealand dollar fell initially during the trading session on Tuesday, only to turn around and bounce rather significantly.
- By doing so, the market is likely to see a certain amount of short covering coming into the picture, but I think we continue to grind lower overall against the New Zealand dollar, which makes sense as the New Zealand dollar is highly levered to Asia and global growth in general.
- It’s also a commodity currency, and therefore it’s likely that action in this pair will continue to be negative in overall trading as we continue to see a lot of questions asked about the flow of international trade as tensions continue to be a moving target.
Technical Analysis
The technical analysis for this pair is very bearish, but it does look like we are trying to do everything we can to bounce in the short term. This more likely than not will lead to a nice selling opportunity, at first signs of exhaustion. Quite frankly, the US dollar continues to see inflows, and the New Zealand dollar of course is a smaller currency, so this is exactly the first place people run to in order to trade against the US dollar. Ultimately, this is a currency pair that I think will rise and fall with risk appetite, which is all over the place.
As long as that’s the case, you will see a lot of volatility, and therefore I think you have to be cautious with your position size. All things being equal, this is a pair that I think remains very negative, and therefore we have to pay close attention because we might get a nice selling opportunity yet again, but it is also worth noting that we have fallen pretty far over the last several weeks, as risk appetite continues to struggle in general.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
