NZD/USD Forecast July 27, 2012, Technical Analysis

By FX Empire Analyst - Christopher Lewis
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The NZD/USD pair absolutely skyrocketed during the session on Thursday in reaction to the European central bank head Mario Draghi stating that the ECB was willing to do whatever it took to support the Euro. While this should have been news, evidently it was. This suggests to the trading community that they will see further easing out of the ECB, and this could be good for asset prices.

However, you should keep in mind that every time the central banks have pumped more liquidity into the marketplace, there has been less and less of an effect. One has to wonder whether or not this was a short covering rally of risk assets, or whether the market suddenly got bullish of economic growth. It's very difficult to think that there is suddenly going to be a feeding frenzy of economic positivity around the globe, so this could be one of those situations where we see the rallies faded. This would not be the first time that the European central bank has disappointed the markets by a long shot, and as such we lean towards this direction.

However, the New Zealand dollar does have a built-in area above current prices at the 0.8050 level that would suggest resistance being blown through if we can close above it. This makes us wonder whether or not it's we can get above that area, and as such would be willing to short this market based upon the shorter time frame candle. We understand that as the risk given the ferocity of the move higher, but the simple fact is that not much has changed in the long run.

If we manage to get above the 0.8050 level, we simply would get out of the trade from the short side and begin to buy this currency pair. This is one of those times where you are essentially putting a small position out to buy the information that will lead to higher profits. If you manage to make profits on shorting this right away, then of course is as good thing. However, if you lose a little bit now only to gain more when you're proven wrong and switch your position, you could be handsomely rewarded as well.


NZD/USD Forecast July 27, 2012, Technical Analysis

NZD/USD Forecast July 27, 2012, Technical Analysis

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