The NZD trades in the shadow of the almighty AUD and the more familiar CAD thanks to its proximity to the US. While the NZD is a commodity play, it is not a play on energy like the AUD and CAD, but on foods like dairy and cattle. Even as inflation has edged lower in many countries, food prices remain stubbornly high. The high prices in these and other agricultural commodities have gripped the NZD in a bull rally for much of 2012.
The $GBPNZD enjoyed an incredible rally in the 1st half of the year. So it seemed natural that a pullback occurred off the key resistance level of 2.10. But when the $GBPNZD broke below the major psychological level at 2.00, price broke down to new lows at 1.47. Since that low, price has marched higher. Last week, price staged a breakout above the previous high at 1.9825.
The new week open has seen price gap higher to a high of 1.9880. The pair is firmly bullish to open the new week. The key level this week is 1.9750. If $GBPNZD remains supported above 1.9750, price targets a move above 2.00. A close below 1.9750 sees price move lower below 1.95. Because the fundamentals still look strong, it will be interesting how price behaves at the 2.00 level which is also the 50% Fibonacci level of the entire breakdown. Trade what you see.
Disclosure: No position
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