NZD/USD forecast for the week of August 14, 2017, Technical Analysis

The New Zealand dollar had a negative week, breaking down below the 0.73 level. There is a lot of noise underneath, so I think that the buyers will return given enough time. The 0.75 level has been resistive, but that’s not a huge surprise considering that it is a large, round, psychologically significant number. The market breaking above that level would be very bullish, and send the New Zealand dollar much higher. However, if we break down below the 0.72 handle, I think at that point we would go down to the 0.70 level. The New Zealand dollars highly sensitive to the commodity markets, so we will have to pay attention to what goes on over there. Also, you have the US dollar reacting to Federal Reserve interest rate expectations, so that of course should be something that’s paid attention to.

Small position sizing

Small position sizing should continue to be the best way to play this market, as there is a lot of volatility. Personally, I believe that a pullback from here should find value hunters given enough time, so I believe that short-term selling is probably about as good as the downside gets. Having said that, if we continue to see risk appetite fading overall, then we could see the aforementioned moved to the 0.70 level underneath, and then possibly even the 0.68 level after that. Ultimately, this market should continue to be very loud and noisy, so the small position sizes will give you a little bit of comfort has your profit and loss column could be rather wild. If we can finally break above the 0.75 handle, then I believe that it’s time to start holding onto a longer-term position. Either way, I think volatility is going to be a major part of this market.