Pulls Back from the Crucial 200-Day EMA

Ultimately, the New Zealand dollar will follow other currencies such as the Australian dollar and the Canadian dollar, both of which are starting to turn around as well. 

• The NZD/USD has found the 0.62 level to be a bit much to get above, as we are suddenly running out of momentum.
• Furthermore, the 200-Day EMA sits right there as well, so it does make a certain amount of sense that we would see hesitation.
• By forming a shooting star for the trading session, it suggests that we have a lot of pressure, and we could be looking at a pullback at this point.

The 0.62 level has been important a couple of times, so it is worth watching. Ultimately, I think this is a situation where we are going to be paying close attention to Federal Reserve expectations, but beyond that, we will also pay close attention to Asia and commodities. Remember, the New Zealand dollar is highly levered to various agricultural commodities, and therefore you need to be cautious with the idea of owning this currency. Regardless, it has gotten far too ahead of itself.

Volatility Ahead

On a pullback, we could get down to the 0.60 level without struggling too much, and then again, we have the 50-Day EMA near the 0.59 level. On the other hand, if we do break out to the upside and clear the 200-Day EMA on a daily close, it opens the possibility of a move to the 0.64 level. This has all been based upon the idea that the Federal Reserve is either going to pivot or slow down interest rate hikes. I think it’s very likely that we could see more mania enter the market, but when there were concerns that the Russians had sent a missile into Poland during the previous session, risk assets got crushed.

Ultimately, the New Zealand dollar will follow other currencies such as the Australian dollar and the Canadian dollar, both of which are starting to turn around as well. These commodity currencies tend to move in the same direction as the greenback, and therefore I think they are all secondary indicators of each other. The only thing I think you can count on at this point is going to be a significant amount of volatility, but that should be nothing new if you have been trading over the last couple of months as the world continues to freak out with every headline that crosses the wires.

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