NZD/USD rose during the previous week as the Kiwi dollar continued to get a bid overall. However, the candle at the end of the week formed a shooting star that was preceded by a hammer, and this shows massive confusion in the market. The pair ran into trouble at the 0.78 level this past week, just as it had a month previous.
The area around the 0.78 level is a minor one as best we can tell, but it has caused reactions in the past. The month of December in 2012 saw it act as resistance, and the market used that as support in April of 2011. With this in mind, we think that a reaction here wouldn’t necessarily be out of the question. The highs have been getting lower over time, and this could be the beginning of a new consolidation zone between 0.78 and 0.75 or so. The levels should also be noted as having 100 pip backstops, forming a thick “zone” going forward if this turns out to be true.
The commodity markets are likely to be choppy in the weeks going ahead as the world tries to figure out whether or not recession is in the cards for various economies. The European Union is a given, but there are several other ones that are vulnerable simply by association. The United Kingdom, Switzerland, and several Eastern European countries are all at risk, and China seems to be slowing down. With this in mind, it is hard to think that the commodity markets will skyrocket. Since the Kiwi dollar follow the commodity markets overall, we do not expect massive moves to the upside in this pair anytime soon, even if we do break above the shooting star that was just formed.
The 0.8000 level should continue to be very resistive, and a breaking below the range for last week could be used as a signal to sell. However, you must understand that the hammer for the week before suggests that the move down won’t be clean, and could be choppy in the short term as a result. If we can finally break below the 0.74 level – this pair falls much further.
NZD/USD Forecast for the Week of January 9th, 2012, Technical Analysis
Originally posted here
