The NZD/USD lost value in a rapid fashion on Tuesday as the U.S Federal Reserve’s Chairman remained aggressive regarding monetary policy stance.
U.S Federal Reserve Chairman Jerome Powell essentially dumped cold water on the short-term hopes for a weaker USD yesterday. While testifying before the Senate the Fed Chairman said monetary policy could actually increase in aggressiveness. These remarks sent a shiver down the spine of the broad markets, and the NZD/USD correlated to the Forex world with a swift nosedive.
The NZD/USD was trading near the 0.61925 mark when trading began to show signs of nervousness. The NZD/USD is around the 0.61100 ratio as of this writing and conditions have been rather choppy. This morning’s early low challenged the 0.60830 level as the NZD/USD tested depths not seen since the 21st of November. The bullish trend upwards that started during the end of November is now in peril of breaking below these important technical values, which were a starting point for strong speculative buying and now have turned into critical support.
This morning’s continued weakness in the NZD/USD shows that financial houses remain nervous. Speculative behavioral sentiment is starting to act upon the U.S Federal Reserve’s warning of more interest rate hikes to come than had been expected. The test of lows early today which then produced a slight reversal higher was important, but critical support levels remain in plain sight.
- A fall below the 0.61000 mark which is sustained could signal additional selling in the near-term.
- Key support near the 0.060900 to 0.60700 must be monitored; if the lower depths begin to get challenged this could spark volatility which tests the fortitude of the New Zealand Dollar.
- The U.S will release Non-Farm Employment Change and Average Hourly Earnings statistics this coming Friday, setting the stage for more potential Forex dynamite.
The ability of the NZD/USD to trade upwards from last Tuesday until yesterday shows that speculative optimism remained within the marketplace. However, yesterday’s sudden move lower and this morning’s lack of a sustained reversal higher, highlights that speculative bulls may be hiding in the shadows for the moment.
The employment data which will be released this coming Friday in the U.S may give the NZD/USD a chance to find some tranquility before the publication of the important reports. This if financial houses continue to believe the NZD/USD has more optimistic days ahead from a buying perspective and want to see the results of the jobs numbers to get more clarity.
But the trend lower in the NZD/USD has been strong, and the currency pair has seen lower values in the first weeks of November and October of 2022. Day traders should be cautious and use risk management wisely. Looking for the potential of more downside cannot be blamed, but targets need to be realistic. Perhaps selling the NZD/USD on slight moves higher which touch perceived resistance and igniting short positions is a conservative bet which may be worthwhile in the short-term.
Current Resistance: 0.61190
Current Support: 0.60910
High Target: 0.61345
Low Target: 0.60780
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