NZD/USD Forecast December 10, 2012, Technical Analysis

The NZD/USD currency pair rose during the session on Friday but managed to pullback enough to form a small hammer. We did however close above the 0.83 resistance level, and this of course is a positive sign.

On a break of the highs from the Thursday shooting star, we would be more than willing to start buying as we think this would signal another leg of in this currency pair. The pair does typically move rather rapidly, and as a result it would not be a surprise to see that type of parabolic breakout that would be a result of this move.

This of course is a very risk sensitive currency pair, and as a result it will be difficult to hold onto a trade in the event of negative headlines out of United States involving the fiscal cliff. If the congressional leaders can get some type of agreement going, this would be very bullish for the markets and the New Zealand dollar as well. This would be mainly predicated upon the idea that the commodity markets would take off in a bullish fashion, and the Kiwi dollar does tend to follow the general sentiment of commodity traders.

We do think that the last week has shown a significant amount of bullishness for us to feel much more comfortable about going long this currency pair though. Because of this, we would in fact actually buy this pair on a pullback as we see significant support right around the 0.8250 level. This is something that we would not have said last week, as the action had been so choppy and we had seen so many minor support and resistance levels that it was very difficult to discern any type of serious bullishness or bearishness either way.

Going forward, we fully expect to start buying this currency pair soon, and would not sell it unless we got below the 0.80 level; something that we think is a very unlikely. If that happens, it will more than likely be the result of a negative headline coming out of Washington DC, and nothing to do with Wellington.