New Zealand Dollar developing Bearish Bias

Falling demand for commodity-linked currencies continued tokeep the pressure on the NZD USD on Thursday. Since topping out at .7643 onOctober 14, this currency pair has trended lower. The series of lower-highs andlower-lows over the past week are indicating that this market may have moreroom to the downside.

Falling demand for commodity-linked currencies continued tokeep the pressure on the NZD USD on Thursday. Since topping out at .7643 onOctober 14, this currency pair has trended lower. The series of lower-highs andlower-lows over the past week are indicating that this market may have moreroom to the downside.

The main driver of direction in the developing bearish tonein the New Zealand Dollar is the U.S. Dollar. Overnight the Greenback receiveda boost against the Kiwi after U.S. Treasury Secretary Timothy Geithner toldthe Wall Street Journal that some major currencies are “roughly in alignmentnow”. Traders read this to mean that the U.S. Dollar may have found a supportbase, underpinning the Greenback throughout the day.

In addition to the developing strength in the U.S. Dollar,the New Zealand Dollar was under pressure earlier in the week when the People’sBank of China surprisingly hiked interest rates. This fueled a sell-off in theNZD USD as traders interpreted this to mean that China’s economy may be heating upenough to warrant the move by its central bank. A slowdown in demand for rawmaterials would curtail economic growth in New Zealand.

Position paring ahead of a long holiday weekend and next Thursday’sReserve Bank of New Zealandmeeting is also putting pressure on this currency pair.

After failing to accelerate to the upside following theattempted breakout over the October 2009 top at .7635, the NZD USD has been insomewhat of a tailspin. Upside momentum has dried up and prices seem to be atan unattractive level for bullish traders.

Based on the main range of .6947 to .7643, the firstdownside objective is .7295 to .7213. An uptrending Gann angle at .7367 couldslow down the break toward the retracement zone, but selling pressure shouldprevail.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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