NZD/USD Technical Analysis October 6, 2011

NZD/USD rose on Wednesday as the commodity markets bounced a bit. The Kiwi dollar is highly sensitive to the global risk profile, and as a result – we don’t like buying it at this point. Yes, it is true the bounce is impressive and solid – but when looking at it in the overall context of the chart, it is simply a bounce at this point. There are far too many potential negative headlines in the marketplace to get overly bullish of the Kiwi at this point in time. We still prefer to sell rallies, especially ones that are showing weaker candles after a run up.

NZD/USD Technical Analysis October 5, 2011

NZD/USD bounced a bit during the Tuesday session as the market bounced from an oversold condition. The pair is still decidedly weak, and the global commodity markets should continue to add to the pressure as they fall over the long run. The pair is a “sell only” pair at this point, and we like selling the rallies as they come. Buying isn’t possible as the global risk environment is far too dangerous at the moment to buy riskier currencies like the Kiwi Dollar. We see this bounce as a “dead cat bounce” form the 0.75 and nothing more.

NZD/USD Technical Analysis October 4, 2011

NZD/USD continued its fall on Monday as the world’s markets sold off. The “risk off” trade is back in fashion, and the Kiwi will always pay when this is the case. The commodity markets in general got whacked on Monday, and the Kiwi paid as a result. The pair is just above the 0.75 level, and we expect there to be a bounce from that level as it is a major round number, but this should only be a bounce from which to sell. The global environment remains the same for the foreseeable future, so selling rallies is probably the way to go going forward. Buying isn’t recommend as the trend is most certainly going against the Kiwi presently.

NZD/USD Technical Analysis October 3, 2011

NZD/USD fell on Friday as investors around the world are dumping risky assets, including commodities. The futures markets all got hit, and as a result the Kiwi got sold off. We are selling this pair only now, and waiting for a rally to fade, or perhaps a breaking of the lows to get short as well. Buying simply would be far too dangerous at this point in time, as there are far too many economic dangers out there now.

NZD/USD Technical Analysis for the Week of October 3, 2011

NZD/USD fell hard after initially rising this past week. The Kiwi is a highly sensitive currency when it comes to the commodity markets, and we think that this pair is a sell only pair now. The 0.75 area should be supportive, but if it gives way – look out! This pair is to be sold on rallies, and if we get below that 0.75 level – we would sell there as well.

NZD/USD Technical Analysis September 30, 2011

NZD/USD had a large range on Thursday, eventually ending up down just slightly. However, it should be noted that it was the bullishness that gave way overall, and that we are approaching the bottom of the Monday candle that was so supportive this week. The hammer on Monday for us represents a massive area from which to sell this pair. The breaking of that level on a daily close gets us short for longer-term trading. We don’t buy this pair – there is simply too much global fear to buy a commodity currency at this point.

NZD/USD Technical Analysis September 29, 2011

NZD/USD fell hard on Wednesday as traders sold off commodities in general. The Kiwi really suffers when the commodities lose, and the session wasn’t any different. The Monday hammer serves as a sell point now, as a breaking of the lows from that session would be massively bearish at this point. The pair could consolidate between 0.76 and 0.80, so we are waiting to see that happen before we sell. We cannot be buyers at this point as the global economic growth outlook is so bleak at this point in time, suggesting that demand for commodities will fall in the near future.

NZD/USD Technical Analysis September 28, 2011

NZD/USD rose during the Tuesday session as the world reacted to a belief that the EU was getting closer to reaching a solution to the debt crisis. However, the pair failed at the 0.8000 resistance level that we warned about, and it looks like the downtrend is still going to be intact. We are selling rallies at this point as there is far too much bearishness in the market to think that the NZD will continue to rise.

NZD/USD Technical Analysis September 27, 2011

NZD/USD fell on Monday, only to turn around completely and form a hammer at the close. The pair looks like a pop is coming, and this could lead to a short-term trading opportunity. We still think the 0.80 level is one that should give this pair a reaction – as it was such strong support previously. The pair could pop, and then continue its fall from that level. As a general rule, we feel much safer shorting form the 0.80 level on signs of weakness, but a small long position could be taken on a break of the Monday highs until we get there.

European News Encourages NZD USD Short-covering

Technical and fundamental factors contributed to a strong rally in the NZD USD on Monday, helping to form a closing price reversal bottom. Although not indicative of a change in trend, this type of pattern typically leads to the start of a 2 to 3 day rally equal to 50% of the last move down.

In what proved to be a volatile trading day, the New Zealand Dollar traded sharply lower early in the session, but began to mount a turnaround to the upside after global equity markets began to firm. News that European officials were working on ways to increase the scope of the Euro Zone rescue fund help fuel the start of this rally.

At this time it’s too early to tell if a permanent solution is being hammered out, but short-traders probably felt the movement by the officials was strong enough to warrant a lightening up of positions. Bearish traders seem to think the news out of Europe means only that officials are bowing to pressure from the European Central Bank, International Monetary Fund and the World Bank and that this reaction is likely to be short-lived.

The fact that the NZD USD remains vulnerable to external factors and looks fragile is one reason to believe that the potential short-covering rally will only last 2 to 3 days or at least 50% of the last break. A rally of this magnitude is likely to attract fresh selling pressure once it completes its objective.

Technically, the NZD USD formed a closing price reversal on the daily chart on Monday. The follow-through rally overnight has confirmed the pattern, leading to a potential rally to .7989 to .8072 over the near-term. The move that will represent a 50% to 61.8% retracement of the last break from .8341 to .7637 is expected to last until Wednesday or Thursday. Looking at the chart, one can see that the 50% level at .7989 is likely to be tested on September 29 or 30.

On the downside, traders should be aware that since the main trend is down, this reversal bottom formation can fail at anytime so it is important to trail stops tightly in case there is a sudden reversal back down.

NZD/USD Technical Analysis September 26, 2011

NZD/USD fell again on Friday as traders are selling any and all commodities. Being so sensitive to commodities has really punished this currency over the last couple of days, and as the world continues to worry – this pair will continue to fall. A bounce could be coming, but quite frankly – as long as we stay under 0.8000, it will more than likely just be a selling opportunity. The world is slowing down economically, and this is bad news for the Kiwi that is so export-driven. Selling rallies and fresh lows is the way to go at this point.

NZD/USD Technical Analysis for the Week of September 26, 2011

NZD/USD absolutely fell apart during the past week, and even closed towards the bottom of the candle. The 0.77 area looks like minor support, and with this pair being so sold off, there is a real chance for a bounce at this point. However, we feel that the bearishness is set in, and that as long as we are below the 0.8000 level, this pair can only be sold. The global markets are nervous at this point, and in bear markets, there can be wicked snap backs to the upside. On anything even remotely looking close to that – we would sell this pair.

NZD/USD Technical Analysis September 23, 2011

NZD/USD fell hard and through the 0.8000 support level on Thursday as traders sold off all commodities and risk-related assets globally. The Kiwi will remain sensitive to falls in the commodity markets and stocks in general. The NZD looks very vulnerable, and we feel that rallies are to be sold as the market has taken a decidedly ugly turn now that we have blown through the 0.8000 level.

Fed Phrasing Sends U.S. Dollar Higher

On Wednesday the U.S. Fed ended its two-day monetary policy meeting by declaring in its statement that the U.S.economy faces “significant downside risks”.  In an effort to combat these impending problems, the Fed made a move to reduce borrowing costs by extending the average maturities of bonds in its portfolio.

This is expected to be accomplished by the purchase of $400 billion of long-term debt and the sale of an equal amount of short-term securities. The move is designed to push down yields on the longer-dated Treasuries.

The action by the Fed was widely anticipated and dubbed by traders as “Operation Twist” even before it was announced.  News of the impending quantitative easing was expected to underpin the U.S. Dollar because unlike other QE programs, this one was expected to raise short-term rates. Instead of posting a solid gain, the Greenback soared because of the language used by the Fed in its statement.

The use of the phrase “significant downside risks” was enough to send the U.S. Dollar sharply higher while pressuring riskier assets. The news that the economy was in trouble was enough to trigger a sell-off in the equity markets. The exceptionally strong Dollar meant that commodities priced in dollars would feel severe downside pressure. This led to a significant sell-off in gold, silver and crude oil.

Earlier in the year the Fed announced that interest rates would remain significantly lower until mid-2013. The initial reaction by Forex traders was to sell the U.S. Dollar; however, Tuesday’s statement gave bullish Greenback traders the green light to significantly increase long Dollar positions. Based on this reaction, it is likely that the financial markets may be entering a prolonged period of “risk off” sentiment.

Setting aside the sovereign debt situation in Europe, traders are now going to react more strongly toU.S.economic reports as the state of the economy is going to take on more significance going forward. At this time, it appears that the problems in Europe are going to have to take a backseat to theU.S.economy.

The rally in the Dollar is telling us that investors are seeking liquidity. This demand for liquidity could last for months until either the Fed makes additional moves to stimulate the economy by pumping massive amounts of dollars into it or it provides some other form of stimulus such as increasing the inflation target rate.

Technically, the monthly Dollar Index shows the formation of a solid support base that could trigger a rally over the near-term to a downtrending Gann angle at 81.21. Based on the main range of 88.71 to 72.70, at a minimum, traders should watch for an advance to 80.71 to 82.59 before any significant selling takes place.



NZD/USD Technical Analysis September 22, 2011

The NZD/USD pair fell hard as the markets were rocked by the Federal Reserve’s lack of easing or “shock and awe” on Wednesday. The pair has reached the 0.8000 level, and this is important as it is such significant support. If this area holds – we could see another large bounce. It happened last time we fell down to test it, but it should be mentioned that the bounce produced a lower high than the previous one. Because of this, we are expecting this pair to fall hard in the near future. In the mean time, we are selling rallies of any substantial amount, as well as selling a daily close below the 0.8000 level.

NZD/USD Technical Analysis September 21, 2011

The NZD/USD pair had a wild day as traders sent the Kiwi back and forth on Tuesday. The pair looks like it is far too choppy at this point to get long or short to be frank about it. The 0.8000 level below is almost certainly going to be massive support that will be difficult to break down through, but the 0.8500 level above looks massively resistant. The pair looks like it will be a victim of news flow out of the EU in the mean time, and any bad news simply tears down gains far too fast. Because of this, we are willing to avoid this market for a few days until it settles down.

NZD/USD Technical Analysis September 20, 2011

NZD/USD fell on Monday, but bounced later to form a hammer just above the 0.82 level. This looks bullish for the Kiwi, and we suspect there will be another push to reach 0.84 in the near term. The currency is presently outperforming its cousin the Aussie dollar, and this shows that New Zealand might be the place to be in the event of positive markets overall. (The commodity trade could come into play at this point.) If we get a bounce in the world’s markets, the Kiwi could be the place to be. A breaking of the 0.80 level wipes out any longs in our opinion. Until that happens, we can only buy when support shows itself like it did on Monday.

NZD/USD Technical Analysis September 19, 2011

NZD/USD continues to fight for the positive at this point, and Friday saw it rising. The 0.81 level is massive support at this point, and the 0.85 – 0.86 levels seem massively resistive. The pair is likely to find itself very range bound for the near-term, and the pair will also be very sensitive to news out of Europe. The Kiwi is a proxy for risk in the currency markets, and as such this pair could be wild in the short-term, but until we get out of this range it will be hard to hold onto trades for more than a few hours at a time.

NZD/USD Technical Analysis for the Week of September 19, 2011

The NZD/USD pair looks very range bound as the pair seems to be stuck between 0.81 and 0.86. The pair is highly sensitive to global risk taking, and will certainly suffer when it wanes. Of course, in these types of markets (meaning the global markets and their issues) anything can happen. Headline risks out of Europe might actually push this pair around more than the fundamentals in New Zealand for the time being. We are fairly ambivalent about this pair because of the fairly tight range and the risk involved in owning it.

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NZD/USD Technical Analysis September 16, 2011

NZD/USD found itself chopping around during the Thursday session, and has shown the 0.81 area to be supportive. The pair will be hard to short until we break the 0.80 level – an area we see as vital to the uptrend. The pair looks like it wants to bounce, but it should be said that the 0.85 – 0.86 levels gave it fits the last time it rallied. Because of this, we feel consolidation between 0.81 and 0.86 will be the play for the next several days and weeks. A breaking of either sends the pair in a new direction, and until that happens, we are buying towards the bottom of the range, and selling towards the top.