A currency often overlooked by forex traders is the New Zealand dollar, which is a great shame because this commodity dollar can often deliver some impressive and consistent trades, particularly on the slower time frames. And for a reason we only need to glance at the daily chart of the currency strength indicator.
Following a sharp move lower in August towards the oversold region of the CSI, the New Zealand dollar then spent the next four weeks trying to move away from this region, before finally finding some traction towards the end of September. Since then the NZD has moved sharply higher against most of its counterparts, with a number of pairs lifting off simultaneously.
Of the pairs which make up our NZD matrix, it has been the NZD/USD and NZD/JPY which have delivered some of the best trades, followed by the GBP/NZD and EUR/NZD.
The move higher in the NZD/USD followed a period of consolidation for the pair as it bumped along the 0.62 region. It was the arrival of the hammer candle of 23rd September which was the first sign the pair was likely to reverse higher. Furthermore, this initial signal also coincided with a move higher for the NZD on the CSI, since when the pair has been moving steadily towards the crucial volume point of control at 0.6553, a price point it has broken in today’s trading.
For the NZD/USD today’s break and hold above the VPOC is also important for two reasons. First the price action is now just 40 pips or so shy of the high of the volatility candle of 24th August, and second the price action is also approaching the 100 ma which currently sits at 0.6681.
Moving forward there is no reason to suppose NZD/USD should not continue to move higher in the short term although we should expect a short period of consolidation in the 0.6680 area where resistance now awaits.