The New Zealand dollar tried to rally, but it has been very negative since the Kevin Warsh speech at Jackson Hole. The turnaround has been quite strong to say the least.
NZD/USD
The New Zealand dollar initially tried to rally a bit during the trading session on Friday but got absolutely crushed as the Kevin Warsh Federal Reserve statement from Jackson Hole has shown that the Fed might be a little bit more hawkish than thought previously. And quite frankly, that's not a huge surprise because we have heard, for example, the Federal Reserve Governor out of Cleveland suggesting that there should be a couple of interest rate hikes still.
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That being the case, this is a market that has just pulled back from the top of a range over the last year or so, so it now looks like it. So I think at this point in time you could still see some weakness. The 0.59 level is an area of resistance previously, and if we can break down below there, then the 0.5850 level.
Technical Analysis
This selloff is pretty brutal. We'll see how it plays out on Monday because then people will have a couple of days to think things out. That could be telling, the Monday session. I think that's the biggest story here.
If we bounce from the 0.59 level, then it might not mean much. It might have been the initial knee-jerk reaction, which is quite often the wrong one. Of course, headlines over the weekend will be crucial as well, with the Middle East up front. So if we get bad news out of there as well, it probably just compounds the selling pressure.
But ultimately, I think the Fed remains a lot more hawkish than people had thought, and now we're starting to see bets that interest rate hikes are still coming or they're getting more in that direction from DC. So with this, looks like we may be rolling over.
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