NZD/USD rose above the range from the previous session on Wednesday, showing real momentum to the upside now. The Tuesday candle was similar to a shooting star, and the breaking of the upper part of the range showed that fresh capital was being deployed in this market.
The Kiwi is strong against almost all currencies at the moment, and the massive amount of easing that central banks are doing will only help to underpin the demand for certain commodities. The markets will more than likely turn to these commodity currencies as long as there are no serious meltdowns in places like Europe or China. As the situation seems to be less catastrophic and more a matter of simple weakness, the old weak fiat currencies/strong commodity trade should continue. With this in mind, a massive agricultural exporter that also has a high yield on its currency like New Zealand will continue to attract inflows of capital.
While the move has been fairly parabolic, the Kiwi has a history of doing this. This is mainly because out of all of the major currencies, it is by far the most illiquid. This makes the move in the Kiwi much stronger than in many other currencies, even the ones that have similar fundamentals. The market tends to grind for a while, and then suddenly take off.
The move does however; beg for a bit of a pullback. Looking at longer term charts, the 0.84 level just above should be considerable resistance. With that in mind, we are waiting for a pullback in which to buy this market. The selling of it can't honestly be contemplated until a sub-0.80 daily close in this pair.
The 0.82 level could be supportive, and this would be the first place we would look for candles supporting a buy position. We don't want to buy at this point as the move is a bit overextended, even by Kiwi standards. The pair is most certainly a buy only pair at this point, and this is exactly what we will do - once the time is right.
NZD/USD Forecast February 2, 2012, Technical Analysis
NZD/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3