NZD/USD continued to rise on Monday despite the light volume in America due to the holiday. The pair is highly sensitive to global risk usually, but it seems to be ignoring the situation in Europe at the moment. In fact, all of the commodity currencies seem healthy at this point, even against the US dollar, which overall has been very strong.
The Kiwi formed a hammer on Friday just under the 0.80 resistive levels and as a result it looks as if the level is being pressed upon in great strength. The level has been important several times in the past, and this time looks as if it will be again as well. The market is grinding up from lower levels, and the slow grind is often a sign that the pressure builds, much like a beach ball being held under water: Once it breaks above the water level, it will shoot straight up.
The commodity trade could continue to get a bid, but the markets will continue to want to buy “things” and “stuff” over fiat currencies. The world currently sees a low-yield environment in the bond markets, (At least the ones that people are willing to be involved in.) and as such, traders are looking for yield wherever they can find it. The swap rate on the NZD/USD is one of the highest you can find in a major or common pair, so this one will always get a bid in these types of environments.
The chart suggests that the grind will continue for the foreseeable future, but the 0.80 level will be the real fight. Because of this, we have to rely on the hammer from Friday to show us the next supportive level for the short-term. The 0.7850 level will be used as our support level in this scalper-friendly environment. On a daily close above the 0.80 level, we suspect that the next stop will be the 0.82 handle. As for selling, we need to see the 0.78 level cleared to the downside as it looks nicely supportive at the moment.
NZD/USD Forecast January 17, 2012, Technical Analysis
Originally posted here
