NZD/USD Forecast October 22, 2014, Technical Analysis

The NZD/USD pair broke above the 0.88 level during the course of the session on Tuesday, but turned back around to fall below that level in order to form a perfectly placed shooting star. Because of this, we believe that the New Zealand dollar will make a move lower, and on a break of the bottom of the range for the session on Tuesday, we are more than willing to sell this pair yet again. After all, we’ve had a nice bounce so far, but quite frankly we feel it is just that: a bounce.

The Royal Bank of New Zealand has recently been involved in this market, selling off the New Zealand dollar. It has stated that it would be more comfortable with this pair being that the 0.68 handle, so the fact that we are starting to show a bit of resistance in this area suggests to us that the sellers are going to step back in and try to accommodate the central bank as they will without a doubt get involved yet again. Even if they didn’t, there will always be that fear and as a result it’s going to be difficult to find people to hold New Zealand dollars for any great length of time.

On top of that, we have the US leaving the quantitative easing game as the Federal Reserve has been tapering off lately. With that being the case, the interest-rate differential should shrink a bit, thereby favoring the US dollar a bit in a time that is without a doubt uncertain to say the least, and the Asian economic numbers haven’t exactly been knocking it out of the park. Remember, New Zealand is very sensitive to Asian economies as they send most of their exports to places like China and Japan.

If we did break the top of the shooting star for the session, we are not willing to buy quite yet. In fact, we need to get above the 0.82 level before we feel that the downside has been cleared. With that being the case, we are most certainly bearish of the New Zealand dollar and will continue to be.