Nervousness Given Another Reason to Remain Strong

Inflation Expectations data from New Zealand came in slightly above the estimate this morning, but this result likely had little effect on the NZD/USD.

The NZD/USD sank to mid-term lows late yesterday, in the wake of a more nervous energy being delivered into Forex by downgrades to some mid and small-size U.S banks.

The NZD/USD is near the 0.60900 ratio as of this writing. This mark is actually a higher mark than late Tuesday’s low which touched the 0.60345 level on the news that a handful of U.S mid and small-size banks had been downgraded regarding creditworthiness by Moody’s. The sudden headline which was delivered abruptly while the U.S indices were still trading, caused an immediate rupture in the broad financial markets.

On early Tuesday the NZD/USD was trading near the 0.61075 mark when it began to lose value. Price velocity certainly increased downward when the U.S downgrade news was announced and the NZD/USD sank further as risk-averse conditions began to hit Forex. However, the NZD/USD was trading near highs of 0.61330 on last Friday and Monday’s apex was only around 0.61185 briefly. The incremental bearish movement in the NZD/USD since Friday, shows yesterday’s U.S. news merely gave the momentum lower further impetus.

Inflation Expectations data from New Zealand came in slightly above the estimate this morning, but this result likely had little effect on the NZD/USD. Yesterday’s low in the currency pair broke through lows produced last Thursday near the 0.60600 ratio and challenged values not seen since the first week of June. This morning’s small reversal higher shows financial institutions may believe the NZD/USD is oversold and speculators may feel the same way.

However, day traders need to remain cautious over the near-term, this because U.S. inflation data will start to be published tomorrow via the Consumer Price Index and Friday will see the Producer Price Index statistics and the results could prove dangerous. Technical traders may have a reason to be skeptical of the data, which will be highlighted from the U.S. in the next two days because the notion that behavioral sentiment is driving NZD/USD price action currently may be correct.

• Yes, the trend downwards in the NZD/USD has been rather strong and a one-month chart of the currency pair does show a rather strong trend lower since the 14^th of July.
• However, as the NZD/USD fights near important support levels of 0.60900 and 0.60850 traders cannot be blamed for thinking some upside potential exists, because selling largely took place over the past 12 hours based on risk-averse conditions in the global financial markets.
• Caution needs to be used as always, but traders who are tempted to look for higher targets of 0.61050 to 1.61100 as short-term speculative wagers may find opportunities attractive.

Current Resistance: 0.61025

Current Support: 0.60850

High Target: 0.61300

Low Target: 0.60590

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