The New Zealand dollar initially rally during the Friday session, but then pulled back a bit to test the 0.7275 level. I think there is plenty of support underneath, and therefore we will continue to see a lot of consolidation. However, longer-term charts look as if they are a bit overbought, so pullbacks could be a concern.
Looking at the short-term charts, I believe that the New Zealand dollar is going to continue to consolidate, giving us an opportunity to trade in both directions if we are nimble enough. I am using the one-hour chart and stochastic oscillator to trade this market right now, but I do recognize that the longer-term charts look a bit overextended. Because of that, we may need to pull back to build up the necessary pressure to go to the upside. If we break down below the 0.72 handle, I think at that point it’s likely that we are going to continue to go lower, to at least the 0.71 handle. I recognize that there is a significant amount of resistance just above, so I do not think that a breakout to the upside is likely. We may have to grind a bit to finally break out, so I think that it makes sense that you be very quick with your trade, and don’t hang onto anything for too long.
Longer-term, the US dollar has been very soft, and I think it will continue to be. However, it’s gotten a bit ahead of itself so that’s why a look at the chart with a little bit of caution. Short-term back and forth trading probably makes the most sense, but I use the stochastic oscillator as a signal, looking for overbought or oversold crossovers, which is one of the most basic ways to trade.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.