Potential signal
Anywhere near the 0.59 level, I am willing to buy w/ a stop at 0.5860 and a target of 0.5975
The New Zealand dollar has been noisy on Wednesday as we continue to bounce around the 0.5950 level against the US dollar. At this point, it looks like a market that will remain very volatile and very choppy, which makes a certain amount of sense considering that there are questions about the overall growth of the global economy and of course supply chains.
Furthermore, you have to keep in mind that New Zealand is vulnerable to fuel shortages due to the Strait of Hormuz being closed as are many other Asian and Pacific economies. With this, I am very cautious about the New Zealand dollar, but the risk appetite profile does dictate that typically if people are feeling a little bit better about the world, they will buy the Kiwi dollar instead of the US dollar.
We'll just have to wait and see how that plays out, but right now it looks like at the very least we are going to have to have the conversation about the possibility of a short-term bounce. That bounce could lead to the 0.60 level, which obviously is a psychologically important figure and a lot of people will be watching closely.
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Market Consolidation and Bond Yields
Overall, this is a pair that I think will probably consolidate in general between now and the non-farm payroll announcement on Friday, which obviously will have a major influence on markets overall. The trajectory of the US dollar will continue to be driven by the bond markets also, which of course have seen extraordinarily high interest rates be a part of the situation.
I think with the 10-year yield approaching 4.5% it does make the US dollar a little bit stubbornly bullish and will continue to keep the New Zealand dollar somewhat soft. Ultimately, I think given enough time the 0.59 level followed by the 50-day EMA will be considered.
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