The NZD USD is piggy-backing the strength in the Australia Dollar despite having a weak economy. As it approaches a pair of tops, watch to see if sellers begin to show up.
The NZD USD piggy-backed the rally in the Australian Dollar in the hopes of catching some of the optimism developing in that market. Although New Zealand and Australia share a similar relationship with China as a trading partner, their economies are not quite at the same level.
Furthermore, the Reserve Bank of New Zealand reiterated last week after it cut its key interest rate that the economy is still going through a period of weakness and that further cuts may be necessary. This doesn’t sound like a developing bullish scenario to me.
The charts indicate the NZD USD is at a critical point as it is drifting higher toward a pair of tops at .5932 and .5979. With the trend down because of the lower top, lower bottom setup, I am looking for sellers to start to show up.
The best indication of a top will be a closing price reversal, however. This means the market will have to push up one more time then close lower. Although the trend is down and the market is in a zone to sell, wait for a good intraday short-signal before pulling the trigger or be patient and wait for a daily reversal top.