Friday October 22, 2010 - 04:23:55 GMT
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New Zealand Dollar developing Bearish Bias
Falling demand for commodity-linked currencies continued to
keep the pressure on the NZD USD on Thursday. Since topping out at .7643 on
October 14, this currency pair has trended lower. The series of lower-highs and
lower-lows over the past week are indicating that this market may have more
room to the downside.
The main driver of direction in the developing bearish tone
in the New Zealand Dollar is the U.S. Dollar. Overnight the Greenback received
a boost against the Kiwi after U.S. Treasury Secretary Timothy Geithner told
the Wall Street Journal that some major currencies are â€śroughly in alignment
nowâ€ť. Traders read this to mean that the U.S. Dollar may have found a support
base, 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 Peopleâ€™s
Bank of China surprisingly hiked interest rates. This fueled a sell-off in the
NZD USD as traders interpreted this to mean that Chinaâ€™s economy may be heating up
enough to warrant the move by its central bank. A slowdown in demand for raw
materials would curtail economic growth in New Zealand.
Position paring ahead of a long holiday weekend and next Thursdayâ€™s
Reserve Bank of New Zealand
meeting is also putting pressure on this currency pair.
After failing to accelerate to the upside following the
attempted breakout over the October 2009 top at .7635, the NZD USD has been in
somewhat of a tailspin. Upside momentum has dried up and prices seem to be at
an unattractive level for bullish traders.
Based on the main range of .6947 to .7643, the first
downside objective is .7295 to .7213. An uptrending Gann angle at .7367 could
slow down the break toward the retracement zone, but selling pressure should
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