By FXEmpire.com
The NZD/USD pair attempted to rally during the week, but in the end failed to do so and finished the week with a shooting star. Because of this candle formation, the 0.79 level looks to be fairly resistive. It should be noted however, that the top of the candle did in fact attempt to break above the 0.80 level – and area that we had anticipated resistance at. With all this being said, it does in fact look like the Kiwi dollar is setting up for a nice short position.
This would of course make sense, as the New Zealand dollar is very risky sensitive. With the seemingly never-ending set of problems in Europe, the markets are simply one headline away from tanking again. The fact that the Kiwi dollar managed to even attempt a breakout to the upside this week was relatively impressive in and of itself. However, the headlines out there are simply far too negative to believe that the commodity markets and other risky assets would continue to climb.
In a world where people were concerned about being paid back by countries such as Spain and Italy, it is hard to think that a lot of risk-taking will be going on. Adding to that is the fact that the Chinese economic numbers are slowing down. This of course will have a dramatic effect on the commodity markets, something that has a dramatic effect on the Kiwi dollar itself. In order to go long the Kiwi dollar, one would have to believe that economic activity is about the pickup or some kind of massive quantitative easing is about to happen.
We freely admit that the latter of the two suggestions above are probably the more likely result. However, one has to wonder how much longer quantitative easing will be looked at as a good thing. Each time the central banks inject more cheap money into the markets, the effect last less and less time. Because of this, we are ready to sell this pair on a break below the bottom of this week’s candle.
Click here to read NZD/USD Technical Analysis.
Originally posted here
