The NZD/USD pair fell during the course of the day on Tuesday, slamming into the 0.85 handle. Not only that, but we broke the back of the candle that had formed for Monday, which of course was a supportive looking hammer. That being the case, it certainly looks like the market could be struggling at this point in time, but I see a confluence of support that could in fact be a bit of a “last-ditch effort” to save the uptrend in the New Zealand dollar.
All things being equal, I have an uptrend line drawn on the chart which I believe in somewhat. I would say am about 80% confident in this uptrend line, but the real support in my opinion is between the 0.85 level, and the 0.84 level below it. As you can see, I have drawn a yellow box, and I believe that is a support zone that will continue to offer buying opportunities going forward.
New Zealand dollar represents risk taking.
A lot of this is going to simply come down to whether or not the markets feel like taking a risk. If they do, the New Zealand dollar will continue to do well. Ultimately though, this bounce is long overdue, and with that I feel that any supportive candle has a good enough risk to reward ratio now that buying more than likely could pay off. Certainly at this point, I am not comfortable selling this market, at least until we get below the 0.84 handle, which would be a break of massive support. Quite frankly, if you are not short of this market already, you have missed that trade.
Ultimately, I think that a bounce could send this market back to the 0.88 handle, and that this correction, albeit fairly strong, is still something that in the longer-term is within reasonable tolerances. I don’t know that we’re going to see anything significant between now and Friday, but I wouldn’t be surprise at all to see some type of bounce appear relatively soon.