Don’t count the Kiwi out: Two ways to play continued NZD/USD strength

The New Zealand Dollar continues to defy gravity.

The currency known also as the kiwi is gaining on expectation that commodities will continue their overall uptrend. Benefiting from both economic and geographic ties to China, the New Zealand economy is benefiting from the “risk on” psychology of seeking higher-yielding assets.

It seems that there’s nothing but blue skies for the NZD/USD despite the daily chart’s recent transition from the mark up trend that has dominated since the bounce from 0.7118 on March 17.

The stall in the uptrend retraced lower towards the 38.2% Fibonacci Retracement before rallying once again from 0.7755 and back into the range of the 34EMA Wave confirming a more neutral stance.

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The daily NZD/USD has corrected lower while also breaking the support of the uptrend by trading lower through the 34EMA Wave. MT4 chart with GRaB plug is available for free at my personal trading blog.

This sideways price action could set up a momentum play – which I am favoring for a breakout – the the NZD/USD can find buying momentum north of 0.8005 which would also take out the May 12 high of 0.7791. I’d rather wait for the major psychological level to be broken as there is a better chance of attention above that level. Although it should be considered that it may not be all BULLISH attention…

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The two parallel downtrend lines have formed what could be considered a wide and short Channel Down which is also a Bull Flag. Chart pattern alert courtesy of Autochartist.

Therefore consider a shorter-term time frame for a long entry on a chart that has a mark up trend; in this way the entry is TREND-FOLLOWING. An alternative to setting up a momentum breakout on the daily would be a swing buy on the 60-minute chart.

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The 60-minute chart is in a confirmed uptrend (note the “twelve to two o’clock” angle of the 34EMA Wave and the green GRaB candles. There is also support from the lower trendline of a Channel Up pattern. Chart pattern alert courtesy of Autochartist.

The swing buy zone is waiting between the 20 period SMA and the 34 period EMA high.

Fundamentally, the kiwi is surging as New Zealand prepares to release the annual budge which is expected to reflect a fiscal surplus virtually guaranteeing a continued strong credit rating.

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