By: DailyForex.com

The NZD/USD pair broke higher during the session on Tuesday, ultimately testing the 0.88 level which has been massively resistant. With that being the case, I feel that the market is about to break out, and a move above the highs from the session on Tuesday will be more than enough of a reason to start buying this market as it would show that we finally broke above the significant resistance above, and should send this market looking for the 0.90 handle. That being the case, I am very bullish of this market but we have to see that break out, or perhaps some type of pullback in order to start getting involved.

Any type of supportive candle below should be thought of as “value.” That value should be picked up by most traders, and I think that at that point in time the buying pressure will be massive and as a result we could see an extreme move higher on the break out.

Interest-rate differential play?

This could be a potential interest-rate differential play, based upon the fact that there is such a lack of yield in the bond markets. I don’t necessarily believe that the Federal Reserve is going to keep its monetary policy loose forever. Because of this, this tells me that this is more or less and interest-rate differential play in the meantime, and also could be highly influenced by the commodity markets, and therefore I will be watching the entirety of the commodity markets in the general “risk appetite” around the world. If things continue to look fairly healthy in the financial markets, I believe that the New Zealand dollar should continue to go higher.

On the other hand, a pullback could bring in plenty of buyers at several different levels below. The 0.87 level below is probably about as low as I think this market will fall, but it most certainly has a “floor” in it at the 0.85 handle, and with that I am essentially “buy only” in this market, and fully anticipate seeing the breakout sooner or later.

NZDUSD 7914

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