By: DailyForex.com
The NZD/USD pair initially surged during the Tuesday session, but turned around as the pair lost momentum. The pair currently is sitting just above the 0.82 support zone, and as such it is trying to differentiate whether or not it is pulling back in order to prove support at previous resistance, or if it's trying to fall much further.
In a world that has massive quantitative easing, it isn't hard to imagine that the New Zealand dollar might get a bit of a bid. Because of this, I am a little hesitant to sell this pair, even though I clearly see that the shooting star from Tuesday suggests that this pair is going to struggle in the short-term.
With the quantitative easing that out there by several different central banks, including and most importantly the Federal Reserve, it would of course make sense the commodities rise on the whole. The Kiwi dollar benefits from this as it is a commodity currency, and as such many traders will run into it in times of easy monetary policy.
As it takes more and more US dollars to buy agricultural commodities, the Kiwi dollar will benefit over time. Unlike the Australian dollar, the Kiwi dollar has the added benefit of being a commodity currency that is related to commodities that people need, not want. There is a huge difference between the demand for wheat and the demand for iron. With concerns of the Chinese slowdown, the New Zealand dollar will probably outperform the Australian dollar on the market.
Looking for a pullback, buying this pair later
Although I can see the bearish pressure mounting, I still think that in the long run this pair will be much higher. The Federal Reserve is simply easing far too much to think that commodities will be higher at the end of the year. Because of this, I actually look at this potential pullback as a blessing in disguise as I may be able to buy the Kiwi dollar as lows the 0.80 handle. At that point time, the currency definitely becomes a bargain, and I would be buying any type of supportive candle. Alternately, if we managed to break the top of the Tuesday ranged this would show bullish momentum picking back up and have me going long as well.
