By FXEmpire.com
The NZD/USD pair has been treading water in the 0.81 area for several weeks now, but this past week saw the pair finally breakout of the range. The 0.80 level has even given way, and this will be a point of great concern for the bulls.
The Kiwi dollar is a great barometer of global risk, and as a result we think that this is the market expressing a doubt as to the health of economic growth overall. This chart is a sign that we are going to enter a “risk off” mode soon, and as a result the commodity currencies in general may find themselves under pressure. The fact that the pair has closed at the low end of the range for the week suggests that we have even further to fall and this could be the start of something big.
The 0.80 level has been our “line in the sand” as far as whether or not we were buying or selling, so now that we have closed below it on the weekly chart – we are sellers on the whole. A break of the lows from this week would be a massively bearish sign, and a hint that the downward momentum could continue. As the world runs from risk as well as commodities, it is hard to imagine a scenario where the New Zealand dollar gains overall.
The 50% Fibonacci level is just below, so we need to make sure it gets cleared as well. Because of this, we suggest waiting until the daily close below the low from last week in order to sell going forward. Otherwise, you could be the victim of a false breakdown. None the less, we feel this market looks very weak, and there is more of a risk to the downside than the upside.
We cannot buy the Kiwi at this time, and will only looks for sell signals as mentioned above. In order to go long – we would need to see significant time spent post 0.80 in this market to feel comfortable.
Click here to read NZD/USD Technical Analysis.
Originally posted here
