The New Zealand dollar fell rather hard during the trading session on Tuesday as we continue to see a lot of questions asked about risk appetite and of course the whole situation involving the Middle East.
The Middle East of course is still a mess as both the Americans and the Iranians are suggesting that they are unhappy with each other and there have been a few movements in the Gulf that have people upset.
At this point, it could put a little bit of pressure on the New Zealand dollar as it is very sensitive to risk appetite and how people are willing to put money to work or not.
The 0.58 level is an area that offers pretty significant support, and I think is a floor in the NZD/USD market, so it'll be interesting to see whether or not the market were to turn back around and bounce towards the 50-day EMA.
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All things being equal, the market is a situation where it is very noisy, and I think we are trying to figure out where we are going next. I think consolidation is something that continues to be a major factor here. The interest rate differential does favor the United States, but speaking of those interest rates, it is worth noting that the US interest rates have dropped a little bit over the last couple of days.
However, I would also point out that New Zealand is highly sensitive to the supply chain shock that could be coming from the Strait of Hormuz being closed. If we were to break down below the 0.58 level, then it could open up a drop down to the 0.57 level. To the upside, the 0.5950 level could be a potential target, but I think we would need to see the US dollar soften against everything else to make that happen. Ultimately, a short-term bounce makes sense, but I wouldn't expect more than that.
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