Potential signal:
- I am shorting a small position near the 50-day EMA, with a stop loss at the 0.5875 level.
- I am aiming to reach the 0.57 level.
The New Zealand dollar strengthened slightly on Tuesday but faces resistance near $0.58 and the 50-day EMA at $0.5820. Traders watch for exhaustion signals amid U.S. rate strength and shifting sentiment around U.S.–China trade relations.
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The New Zealand dollar initially pulled back just a touch against the U.S. dollar at the open on Tuesday, only to turn around and show signs of strength. The $0.58 level above is a barrier that traders will be watching closely, as it is a large, psychologically significant figure and an area that has been important several times in the past.
Furthermore, the 50-day EMA sits right around the $0.5820 level, and traders will monitor that area carefully. Any signs of exhaustion near the 50-day EMA or the $0.58 level, for me, represent a selling opportunity. A simple secondary area to look at would be the $0.5850 level, as it has also proven important. You can think of the 50-pip range in that zone as an area of previous support that should now act as resistance. All things being equal, signs of exhaustion in that region will likely be sold into, especially as the market anticipates the FOMC statement and, more importantly, the accompanying press conference.
Signs of exhaustion, in my view, would suggest that the market is reverting to a pro–U.S. dollar stance, which I fully expect before it’s all said and done. The New Zealand dollar has gotten a modest boost from hopes that the United States and China are softening their tone in trade discussions. Remember, New Zealand’s economy is highly tied to China and the broader Asian region as a commodity exporter.
New Zealand is a small, commodity-driven economy, primarily trading soft commodities such as agricultural goods with China, Indonesia, and Malaysia. As economic activity in Asia picks up, the demand for commodities overall tends to rise, not just from New Zealand but also from countries like Australia. However, at this point, global sentiment remains somewhat cautious, as the U.S. dollar has regained strength and the U.S. economy continues to outperform expectations, keeping interest rates higher. That makes the dollar attractive. I’ll be watching the 50-day EMA very closely, as I believe that’s where we’ll see the true direction of this market revealed.
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