Monday, August 11, 2014

New Zealand dollar breakdown | Support level looms large

The Kiwi (New Zealand dollar - NZDUSD) broke out of what was a bearish pennant formation in Technical Analysis overnight, to the downside. This is consistent with its gradual reduction from the highs of July and the comments of the governor of the Reserve Bank of New Zealand at the last interest rate rise announcement, on July 23rd. when he said:

“With the exchange rate yet to adjust to weakening commodity prices, the level of the New Zealand dollar is unjustified and unsustainable and there is potential for a significant fall”

Now we cannot always give credence to Central Bankers when they attempt to jawbone their currencies into depreciation, but in this case we also believe that the RBNZ has helped the situation along by possibly intervening directly in the Forex market (see Kiwi intervention by RBNZ?)

Support level looms large

Now price in Kiwi is approaching support at 0.84, and this is also a nice round number. It has already broken through its 200 Day Exponential Moving Average (EMA), which is bearish, but it could be held up here at this support level.

Further comments by the RBNZ would have the effect of sending it on its way down, but a delay at this support level could also be on the cards, as these levels are watched and respected by a great number of market participants.

No comments:

Post a Comment