The New Zealand dollar has been strong in early trading on Monday, as we continue to look at this area just above as a point of potential inflection.
NZD/USD
The New Zealand dollar has seen itself just take off during the kickoff on Monday for the week against the US dollar, as we continue to see the market try to get to the 0.58 level.
The 0.58 level is a large, round, psychologically significant figure that previously had a bit of support in the market, so market memory could be a potential outcome here. It’s worth noting that the 50-day EMA is right here as well, so some people will be looking at this through the potential of a technical barrier.
Risk Appetite and the 0.58 Inflection Point
Nonetheless, this is a market that is highly sensitive to the risk appetite out there most of the time, as the New Zealand dollar is highly correlated to commodity-type currencies, and I do believe that this is a market that will continue to be interesting to watch after this V-shaped bottom. V-shaped bottoms, a lot of time, attract traders looking for momentum.
The question now, once you run into a certain amount of resistance, do you have the ability to take off to the upside and continue to rally, or is it a situation where traders are looking for signs of exhaustion to take advantage of the US dollar? The US dollar of course, could be looked upon favorably in the situation where the fighting intensifies in the Middle East, so this 0.58 level for me is an area of inflection that we need to watch very closely.
For what it is worth, you can also make an argument that it is potentially going to be looked at and studied by Fibonacci retracement traders because the 50% Fibonacci retracement from the drop is there as well, so very interesting spot to find ourselves in.
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Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions
As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire
