By Roger J Kerr
The Kiwi dollar is retreating from its 0.8300 highs as global investment and commodity markets switch more permanently into the “risk-off” mode.
It is not hard to see the speculative buyers of the NZD (who drove it up from 0.7800 to 0.8300) now unwinding their positions as we head to below 0.8000.
The turn in currency market sentiment/direction is mostly related to commodity prices correcting downwards further due to global growth doubts, extra oil supplies coming on to the market and the US Fed Reserve not contemplating a QE3 monetary stimulus.
I would not be surprised to see the NZD/USD rate challenge the support area of 0.7850 this week, as the FX markets sell-off the Euro against the USD ahead of the Greek parliament austerity vote.
A break below $1.4000 in the EUR/USD rate would trigger further Euro selling.
The two key international currency drivers of the Kiwi dollar value, being the: AUD/USD rate and the EUR/USD rate are now testing major support areas on their uptrend lines over the past 12 months. A drop in the AUD/USD rate below $1.0450 breaks the uptrend line; whereas the EUR/USD still has somewhat further to go to $1.3750 to test the uptrend line.
The CRB Commodity Price Index 12-month uptrend line was broken in May. Commodities are now on a major downward correction down with the debate of how far they will fall.
--------------------
* Roger J Kerr runs Asia Pacific Risk Management. He specialises in fixed interest securities and is a commentator on economics and markets. More commentary and useful information on fixed interest investing can be found at rogeradvice.com
No chart with that title exists.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.