The New Zealand dollar has rallied a bit during the training session lately, as the 0.62 level continues to be of importance. The 200-Day EMA sits near the 0.63 level, and it does look like an area that a lot of people would be paying close attention to. Because of this, it looks as if we are going to try and figure out whether or not the market is going to continue the uptrend, or if we are going to run into a buzz saw of resistance.
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To the upside, the 0.6350 region is an area that has been quite difficult to get above in the past, and therefore think it makes a certain amount of sense that it will continue to be difficult to get above. If we were to break above there, then I don’t think there’s much to keep the market from rallying to the top of the overall consolidation area, meaning that the NZD could go as high as the 0.65 region. That is a large, round, psychologically significant figure, and an area where we informed little bit of a double top. Breaking above that would be extraordinarily bullish, but it’s going to take quite a bit of effort to make that happen.
On the other side of the equation, if we were to break down below the 0.62 level on a daily close, then it opens up fresh selling pressure. At that point, you would have to look at the New Zealand dollar as forming a huge “M pattern”, which is a common pattern that a lot of people use the trade from. The “measured move” would open up a drop down to the 0.59 level.
Keep in mind that the NZD is highly levered to the commodity markets and of course growth globally, with a particular slant towards Asia. As China reopens, that does have some people thinking that the New Zealand dollar should do quite well, but it’s worth noting that the economic conditions around the world are rather tenuous at best, so it makes some of these commodity based currencies a little less than ideal.
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