The unwind of the carry trade commences as the commodity dollars become victims of the US rate increases. Interest rate compression of yields has become massive as RBNZ cut interest rates again last week. The unwind of the carry trade as well a combination of profit taking, has taken its toll on the com dollars and more so the kiwi.
The com dollars are heading to the down side and have become very week. We are looking at a sell the highs approach to trade these pairs. Not only they are showing weakness with the US dollar but also the cross pairs.
The kiwi has made a lower high at the .74’s and its a clear failure, sold off forming 3 big bearish day candles. This is a very bearish out look for the pair and with 3 days of strong selling. On the 4H and D1 charts trend support has been broken and will likely get a bounce back up the this level of around .7100 before going short again.
Looking at the Kiwi it has a very distributive top and may be forming a Head and shoulders pattern on the daily. If the neckline is broken we may see price back down to the .66700 support level in weeks to come.
I cant see bids coming in until its hits around the 70’s. It seem to be pushing to get down there. There also lay the 200SMA on the daily and weekly trend support. .70300 will be the most likely place to go long.
I think the main driver will be the rate compression between the US dollar and the commodity dollars. The RBNZ governor Wheeler did mention they were looking to intervene and did not like the Kiwi at current levels.
On the news front New Zealand retail sales may be a driver for this week.
Main resistance at .72700
Near term resistance .71700 .71300
Strong support at .70300
Trade safe. 🙂