- The New Zealand dollar has fallen a bit during the trading session on Friday as we are looking to the 0.5850 level, an area that has offered support a couple of times recently. Ultimately, if we can break down below there, we could see a test of the 0.58 level, and I think it’s possible that we have a “zone of support” in this region.
- Breaking down below that would be a very ugly turn of events, and it is worth noting that the New Zealand dollar has completely fallen apart over the last couple of days, and things are getting a little overdone.
Federal Reserve
The Federal Reserve cut interest rates on Wednesday but did not give the market the “super-duper dovish statement” that they wanted. In other words, it’s likely that the market was pricing in a ton of interest rate cuts in the short term, and the US dollar has strengthened as a result. The question at this point in time will be whether or not the New Zealand dollar continues to fall apart. If it does break down below the 0.58 level, this is a very dire sign for the Kiwi dollar to say the least.
Reserve Bank of New Zealand
The Reserve Bank of New Zealand recently cut rates as well, but there is more of a concern when it comes the New Zealand economy than the US economy, as New Zealand is so heavily sensitive to Asia, and global trade. After all, New Zealand is a commodity-based economy, and if things start to slow down, it makes quite a bit of sense that we would see some negativity when it comes to New Zealand itself.
There is a potential bounce ahead though, and it’s worth saying then the US dollar gave back some of its gains against some of the European currencies, but it looks like after the Federal Reserve announcement, we have returned to the idea that perhaps Europe is a little stronger than Asia. If we do bounce from here, I think the 0.5925 level area that could offer a bit of resistance based on the 50 Day EMA.
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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.
