NZD/USD
The New Zealand dollar, as you can see, has bounced ever so slightly early on Thursday, breaking below the 0.5850 level is a relatively big deal. We have now cleared the neckline of maybe a potential complex head and shoulders or for that matter, just cleared an area that’s been important previously. With the RBNZ cutting rates, it makes a certain amount of sense that the New Zealand dollar softens. The question now is where do we go from here? My suspicion is that rallies will be sold into, and I would expect the occasional bounce here, but I still believe that this market could go down to 0.5750, maybe even 0.57.
AUD/USD
So, in the Australian dollar, we have a continuation of the negativity. We are seeing a little bit of support right around the 0.64 level. So, I’m looking for a short-term bounce here. Now, if we get anywhere near 0.65 and show signs of exhaustion, such as a long wick to the upside, then I’m more than comfortable shorting the Australian dollar. The main reason being as the Aussie did gain against the US dollar, other currencies were doing quite well. The Australian dollar and the New Zealand dollar both seem to struggle and never really got escape velocity from any of the resistance. So, if the U.S. dollar does make a surge higher here, it’s going to really punish both the New Zealand and the Australian dollars.
USD/JPY
And finally, here in the U.S. dollar Japanese yen, when I look at this, I see a chart that is stuck between the 50 day EMA and the 200 day EMA, but if we can get above the 148.50 yen level, I think that allows us to go back towards the 151 yen level. Remember, you do get paid to hang on to this pair, so I like the idea of being long and in fact have been most of the last, I want to say six weeks or so. And if you allow that to happen and you get any type of stability at all, eventually that swap makes it somewhat of free trade and luckily, I’m just about there now. I do think though that if we were to break down below 146 yen, we could drop down to 144 yen. But right now, it looks to me like the US dollar is hanging tough against the Japanese yen. Contrast the Asian currencies to the European currencies which are starting to soften as well but did much better. This tells me that the forex world is looking at Asia through the prism of a bit of weakness, Europe in the prism of some recovery. And at this point, I don’t think they really know what to do with the US dollar. Although, here recently, it certainly looks like the US dollar is starting to strengthen.