NZD/USD Forecast July 31, 2015, Technical Analysis

The NZD/USD pair initially fell during the course of the session on Thursday, but found enough support below the 0.66 handle the turn things back around and form a hammer. With this being the case, we feel that the market may head back towards the 0.6750 level, perhaps even higher than that. However, we do recognize that this market is still most certainly in a negative trend, so we are actually going to look at any rally as a potential selling opportunity. We need to see some type of resistant candle in order to start shorting, and as a result we will have to be very patient. In fact, we may wait until we get some type of resistive daily candle, meaning that we will simply be very patient in order to trade this pair.

Remember, the New Zealand dollar is highly leveraged to the commodity markets, which of course have been getting pounded lately. With this, it’s not a surprise at all that the New Zealand dollar may get a little bit of a relief rally, but quite frankly we feel that it’s only a matter of time before he break down. Yes, the New Zealand dollar offers a bit of a positive swap, but that’s swap, or interest-rate differential, has recently tightened up as the Reserve Bank of New Zealand had a surprise interest-rate cut.

The shape of the candle is of course a hammer, and that is bullish but we feel a bit uneasy about trying to start buying this market on a countertrend attempt. We believe that the market will continue to favor the sellers overall but certainly we’ve been oversold for some time, so we will have to keep our minds on that fact. Ultimately though, it is not until we break above the 0.70 level that we feel comfortable buying for a longer-term move, as that would show a significant bounce in a market that has been sold off so drastically. Ultimately, until we get above that level we are “sell only”, and as a result we can afford to be patient.