NZD/USD Forecast July 2, 2013, Technical Analysis

The NZD/USD pair rose during the session on Monday, closing just above the 0.78 handle. This level is the top of the recent consolidation that we’ve seen for two weeks now, and as a result we feel that the selling pressure probably will step up as we rise. Nonetheless, we do not see this market going above the 0.80 handle, and certainly not above the 0.81 handle, which is where we need to see the market close to consider buying at this point in time.

The New Zealand dollar is highly leveraged to commodity markets, and as a result we do not expect to see any bullishness last for any real length of time. If it did, this would be a very positive sign for not only the New Zealand dollar, but the commodity markets as well. There seems to be a serious lack of growth around the world, and therefore most commodities are under serious pressure at the moment. Although New Zealand is more associated with “softs”, the reality is that the Kiwi dollar tends the move with the overall “attitude” of commodity markets on the whole. Because of this, even though New Zealand produces no gold, or silver, the New Zealand dollar can often move with both of those markets as well.

Going forward, we expect this market to be choppy at best, and that should continue to be difficult to trade for a lot of people out there. But, if you recognize the fact that we are at the lows of the year, you also can recognize the fact that it is only a matter of time before we get that bounce, and that bounce should be a selling opportunity. This is going to be the case with most commodity currencies, and the New Zealand dollar tends to be the least liquid of the markets, so this means bigger moves overall. While the Australian or Canadian dollar might move 70 pips during the session, the Kiwi dollar might move 140. Because of this, it is a favorite of hedge funds due to the volatility. We expect the Kiwi dollar to get absolutely pummeled sooner or later, and are being patient and waiting our turn to start selling.