NZD/USD Technical Analysis – January 26 2015

The NZD/USD pair initially gapped lower at the open on Monday, but as you can see turned back around to shoot much higher during Asian and early European trading. Ultimately though, we could not sustain the gains in the marketplace, and it looks as if the 0.75 level has in fact offered enough of a deterrent for the buyers to step away for the marketplace and let the sellers resume controlling the New Zealand dollar overall. Because of this, I believe that this market is going to continue to go lower, and it’s only a matter of time before we pushed too much lower levels, which I believe means that we will test the 0.70 level given enough time.

The shape of the candle of course is negative, and the fact that it comes at the bottom of a strong downward move tells me that there simply is no real strength behind any buying at the moment. The 0.75 level should now be resistance, and I believe that the market is in fact going to struggle to get over that area in the near term. Remember, the Reserve Bank of New Zealand has recently stated that it believes “fair value” in the Kiwi dollar is 0.68 to the US dollar. With that being the case, we also have to keep in mind that the central bankers in Wellington step into the marketplace and actually shorted this pair recently as well. Because of this, it is very likely that the New Zealand dollar will continue to be on its back foot for the time being. On top of that, you have to keep in mind that the New Zealand dollar is highly sensitive to commodities markets, and they do not look healthy at all right now.

Ultimately, I don’t know if we can break down below the 0.70 level, but I do think we need to test that area. Down in that area we could have a significant long-term buy-and-hold type of signal, but at this point in time I would be very skeptical of such a formation. I believe in selling short-term rallies will continue to be the way traders approach this pair.