NZD/USD rose in later hours of trading after first falling on Tuesday. The pair is highly correlated with commodities, and as such enjoyed a bounce from the lows over the last couple of days. However, the pair is also highly influenced by trader attitudes about global risk, and in this environment it is constantly waxing and waning.
The resulting candle for the day is hammer-like, and could either be a sign of support, or a sign of weakness – depending on how the market breaks from here. The breaking of this candle to the upside is very bullish, but we fear any time that the market gets bullish on risk – it seems to give up gains rather rapidly. The breaking of the bottom of the candle is very bearish, and would make the candle a “hanging man”, which is very bearish for the market.
As the markets have been so bearish lately, the market for the Kiwi dollar has fallen quite far. The bounce we have seen over the last few days is what we think it is: just a bounce at this point. In fact, we would rather see a daily close above the 0.8000 level as a sign to buy as the room from a bullish break isn’t quite large enough for our trade to run.