New Zealand dollar choppy on WednesdayThe New Zealand dollar initially tried to rally on Wednesday, but then rolled over a bit to show a bit of indecision. Ultimately, the 0.70 level is of course a large, round, psychologically significant number, and it does look like a string offer a bit of support. However, with the jobs number coming out tomorrow, we are likely to see a significant move.
The New Zealand dollar is highly sensitive to commodities, almost everybody knows this. It is also sensitive to risk appetite in general, so of course stock markets, the previously mentioned commodities, and even bond markets come into play. And it is the bond markets that we should be paying attention to right now. This is because the United States will release a jobs number on Friday, and that could either raise or lower interest rate expectations. Currently, the Federal Reserve seems to be the sole central bank willing to raise rates. This of course puts a lot of upward pressure on the greenback, and by extension put downward pressure on this market.
While the New Zealand dollar is a bit of a proxy for China, it should be noted that the People’s Bank of China has started to ease its monetary policy, which is the exact opposite of what’s going on in America. Because of this, it suggests that perhaps we will continue to see greenback strength against both the New Zealand dollar and the Australian dollar. However, if the jobs number is very poor, we could rally from here. I am not a buyer until we break above the 0.71 level though. If we break down to a fresh, new low, the market then should go to the 0.68 level underneath, which is the bottom of the longer-term consolidation. Thursday will probably be quiet though.