When you analyze a currency, the best thing you can do is look at how it performs against several currencies. Sometimes, the Forex markets are relatively clear that we are at an inflection point, and it’s these times will we should set up and pay attention. At this point, it looks like the New Zealand dollar may be flashing that we are ready to have a significant move in the next few days.
The New Zealand dollar of course is a “risk on” currency. In this video I am taking a look at the NZD/USD, NZD/CAD, and NZD/JPY pairs. By looking at several different markets you get a general feeling as to how the Forex world thinks about specific currency, and not focusing just on the randomness that you can get in a specific chart.
New Zealand dollar against US dollar
Looking at the NZD/USD pair, it does look relatively bullish but Friday was a slightly negative candle stick. We are approaching a significant zone of noise between the 0.68 and the 0.69 levels, so the short-term pullback on Friday does make sense. The question now is whether or not we can continue to grind higher? Sometimes, that answer can be seen on other charts, or at the very least hints of what is more likely than not.
New Zealand dollar against Canadian dollar
When you look at the NZD/CAD pair, you can see that we have stalled at roughly 0.88 CAD. The market ended up forming a perfect shooting star just below the 200 day EMA on Friday, so it does suggest that we could be looking at a short-term pullback. There is support underneath obviously, but I find that it is probably somewhat minor, but it is there and should be paid attention to. Near the 0.8775 level I suspect we could have a little bit of a fight on our hands if we break down.
Don’t make this mistake
However, one huge mistake that Forex traders tend to make is that they look at the shooting star and think that you can only sell it. That’s not the case at all. Think of it this way: a shooting star brings in a lot of sellers. If they get blown out, they will have to turn around and buy this market to cover their losses. A move above the 0.89 level could very well send a flush of new buyers in this market. In other words, it becomes a bit of a binary trade, you buy a break to the upside of the range, or you sell to the downside.
New Zealand dollar / Japanese yen pair
The final currency pair, the NZD/JPY pair has stalled at roughly ¥73. Ultimately, the shooting star is very negative but I think there is support below at the ¥0.7225 level. If we break below the bottom of the candle stick for the day on Friday, then I think that will be our target. However, if we are to break above the top of that shooting star and trap the sellers, we will go forward to fill the gap above at roughly ¥73.80, perhaps even higher than that.
All things being equal, I think we are going to have a move in the next couple of days with the New Zealand dollar, the question now is whether or not it is going to be a short-term pullback, or are we going to pick up pace to the upside? You have your parameters to look at in order to get that answer in the next 24 hours or so.
Jul 21, 2019 12:16AM ET