The New Zealand dollar drifted lower again on Monday, as the shooting star from Friday shows real weakness here.
NZD/USD
The New Zealand dollar has fallen a bit during the trading session on Monday in a classic pullback from a shooting star on Friday. The question now is whether or not we can continue to see momentum to the downside.
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It is a little stretched to the downside, but quite frankly, I think this pair finds its way to the 0.56 level, possibly even 0.55 again, before it's all said and done. It was at 0.55 in the early part of 2025, so it's not that amazing that we could fall from there. Keep in mind that interest rates in America remain somewhat elevated, and there are some concerns about the Federal Reserve tightening monetary policy later this year.
Economic Headwinds and Dollar Breakout Dynamics
But the reality is also that the New Zealand dollar is facing some headwinds due to the recent shocks to the New Zealand economy. New Zealand is highly sensitive to Asia, so you'll have to watch that as well. And ultimately, I think you've got a scenario where just the simple momentum will continue to be enough to keep this market down.
In fact, you could even make an argument that you fade rallies here to take advantage of cheap US dollars. The US dollar is breaking out against multiple currencies, not all of them. You are going to have to pick the right currency, but the New Zealand dollar is definitely one that is going to remain, I believe, weaker against the US dollar than many others, for example, the British pound.
So, I like fading short-term rallies just as I did at the end of the session on Friday. Whether or not we have any follow-through, we'll just have to wait. If we don't, then somewhere near the 50-day EMA, I probably start looking to short again.
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