The New Zealand dollar has been riding the waves higher and today was no surprise, but we are nearing critical levels and the momentum around the NZD is something that is starting to look unsustainable in the long run. Case and point today's ANZ business confidence reading which came in weaker at 3.2 compared to the previous months reading of 7.2, this has been lead down sharply by the agricultural side of the business sector which is still struggling with the drop in commodity prices but also the weakness that has been apparent in the global dairy market. Additionally there is now talk of further rate cuts in the year if the economy does not improve, but for the time being the weakness in the USD is driving the NZDUSD higher.
The NZDUSD has so far shot up sharply on the charts to a marginal higher high on its candle wick. Resistance has so far been very tight at 0.6963 and this should come as no surprise as it approaches the next major level at 0.7000. The NZDUSD has traditionally never liked round number levels like the 70 cent mark and may look to play of this level, as many will be predicting that a NZD this high will have negative impacts on the economy and the Reserve Bank of New Zealand may even look to jawbone this if it sustains at this level. For support levels on the chart the level at 0.6733 looks very strong, but I would expect the 20 day MA and the 50 day MA also to act as dynamic support as the NZDUSD has previously liked to play of these levels.
Gold markets are looking very interesting in recent days as the market starts to feel a little less risk averse as before and seems to be looking at risk taking opportunities, ultimately this leads to a fall in the value of gold altogether. The recent USD weakness had helped gold propel itself higher on the charts, and I still anticipate we could see further weakness despite the recent jump in unemployment claims to 276k (265k exp), however FED member Evans was today dropping hints about employment being upbeat and this may be a hint to the upcoming non-farm payroll that is due out as per usual tomorrow.
The main thing with gold however is the technical patterns that have formed recently on the chart. For a long time we saw strong bullish movements on the back of the US weakness, but right now we are seeing a bearish channel forming which has so far confirmed at least a bearish trend line with a strong 3 touches from the highest point on the daily chart. What is also interesting is the 50 day MA which is rising up the chart and is looking very interesting at present and almost shepherding gold when it tries to move lower. At some point we could see a large push through here or a crunch between the bearish channel and the 50 day MA and if we a positive non-farm payroll move tomorrow look to see gold push down to the bottom of the bearish channel in play.
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