By FXEmpire.com
The NZD/USD pair took off on Friday in order to continue the consolidative tone it has had lately. The 0.83 level will need to be broken to the upside in order to break out of the recent “rectangle” the pair has been forming, and with Friday’s action, this could very well happen. The pair has the 200 day exponential moving average just below the current rectangle, and as a result naturally will have a bid of a bid underneath it.
The markets have interpreted Dr. Bernanke of the Federal Reserve’s comments this week as a sign that more easing is coming out of America, and this will always increase the demand for commodities. The Kiwi dollar of course follows commodity prices, and this move makes perfect sense as a result of this relationship.
The 200 day moving average is starting to slope upwards again, suggesting that momentum may be picking back up. Certainly, the candle on Friday suggests that the likelihood of continued momentum to the upside is fairly high, and we wouldn’t be surprised to see the market try the 0.83 level on Monday as a result.
We know we are getting fairly close to the top of the range now, but we certainly are not willing to sell this pair as it looks far too strong. The best strategy in our opinion is to only buy the Kiwi, and on any pullbacks as it continues to show resilience. The 0.80 level makes a natural floor in this pair as it is such a large “round number”. The pair continues to be a great barometer of commodity markets, and unlike the Aussie it doesn’t follow the gold markets but rather all commodities in general.
The “line in the sand” for us is actually the 50% Fibonacci level which is just below the 0.7950 level, and we think that any close below there is what it will take for us to sell at this point. The likelihood of this market seems a bit low at the moment, but we will use that level as a point of reference just in case the markets fall apart.
Click here to read NZD/USD Technical Analysis.
Originally posted here
