The New Zealand dollar initially tried to rally during the week, but rolled over drastically, especially after the results of the election were announced. With Labour taking over, worries are that the spending in New Zealand will accelerate, and this of course influences bond markets, and just about everything else involved in New Zealand. Now that we have cleared the 0.70 level, it appears that the market will continue to drive lower from here, perhaps looking towards the next support of level at the 0.68 handle. A breakdown below there would be catastrophic, and send the New Zealand dollar to fresh, new lows, probably somewhere closer to the 0.63 handle next.
At the same time, looks as if the Federal Reserve will be more hawkish, and that has given strength to the US dollar. Because of this, it looks as if we will continue to see sellers in this market, and short-term traders are most certainly favoring fading rallies overall. I think that the market will have a hard time rallying from here, and I also believe that we would have to break above the 0.72 level to instill enough confidence to have large amounts of money flow into the New Zealand dollar. While the move may be a bit overdone, it looks to me as if we still have a way to go before we find significant support. Because of this, I maintain that we should have a negative week, and any rally at this point will be looked at with suspicion. This will be especially true if the commodity markets rollover as well, which do look susceptible to selling pressure with US dollar strength in general. I remain bearish, but would be particularly interested in what happens at the 0.68 handle.
NZD/USD Video 23.10.17
This article was originally posted on FX Empire
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