The New Zealand dollar has been rather strong during these days as it looks like we are continuing to build a massive bullish flag against the US dollar. The question of course is whether or not the bullish action in the flag ever kicks off? If it does, it could lead to a move all the way to the 0.73 level, which is roughly 1000 pips above current trading.
The 200-Day EMA sits right in the middle of the Friday candlestick, in the 50-Day EMA sits at the bottom of it. However, one has to be cautious due to the fact that it does seem like we are running out of momentum. Quite frankly, the Friday candlestick is impressive, but it has not broken out and therefore one has to wonder whether or not we pullback yet again. It’s a simple matter of waiting, but it looks as if a big move could be in the cards.
The Royal Bank of New Zealand is much more hawkish than many of the other central banks around the world, so it does stand to reason that the New Zealand dollar will be a strong performer. However, there is also the risk appetite aspect of this pair, as New Zealand dollar is attached to a commodity driven economy. In other words, if global growth starts to slow, that could have a negative influence on the New Zealand dollar itself. Yields around the world are rising, so it does help the Kiwi as well, but if we start to see more fear jump into the market, that could turn this market around completely.
The bearish scenario could play itself out if we break down below the 0.61 level, something that looks less likely after the action on Friday. However, it’s probably worth noting that there is a lot of noise just above and it is going to be difficult to break through. I would not expect it to happen immediately, so we may have some more work to do before we can really start moving to the upside, or perhaps even break down.
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