• NZD has declined 5 per cent vs Australian dollars, whereas USD has risen 8 per cent versus Australian dollars
• NZD has declined 6 per cent vs Swiss francs, whereas USD has risen 9 per cent versus Swiss francs
The British pound is not in this list simply because the moves are about the same and therefore neutral. What this list ultimately shows is that the US dollar is on a strong rise while at the same time, the NZ dollar is also on the decline, albeit comparatively a bit less so versus the opposing US dollar rise. The combination of the two has given us the 12 per cent peak to trough fall on NZDUSD, a significantly larger move than any other listed above.
This is what exporters have been waiting for, the New Zealand dollar finally heading lower... or is it?
NZDUSD has traded at or near here, every year since 2007
On one side of the equation, NZDUSD has been making moves above 85c and in fact first broke the 85c barrier in 2011, making a high that year of 88.42c. Despite multiple breaches of 85c in 2013/14, the Kiwi dollar has still never managed to beat that high recorded in 2011. Did the headlines make you think otherwise? That's right, the Kiwi peaked in 2011. It has come close to going higher, but it has failed. It has however hung around that level a lot and particularly in 2014, has spent a lot of time above 85c.
On the flip side, after breaking the 75-76.50c range back in 2007, the Kiwi has slipped back into this zone again every single year since then - except thus far in 2014 where the lowest price recorded to date has been just over 77c. So while we have fallen 12 per cent these last few months, putting this move in perspective it is still higher than the lows recorded in any of the preceding seven years. As a matter of fact, the lows recorded so far in 2014, are higher than the lows recorded in any of the last three decades!
So this fall is completely normal price behaviour, yet it is a big move so it captures the public and media attention now, just like it did after near identical moves in recent years; 14 per cent lower from July to Sept 2011; 10 per cent lower from March to May 2012; 10 per cent lower from April to July 2013. All of these moves started from highs above or near 85c and ended in or around the 75-76.50c range.
NZDUSD is in a range
We can now officially say the New Zealand dollar is in a long-term range between highs consolidating around 85c and lows around 75c. This range is most clearly seen when looking at a monthly chart over the last 4 years.
Where to next?
With NZDUSD trading as I type this around 79c and in a solid downtrend on the daily chart, NZDUSD has the legs to move lower. Where to? You might have guessed based upon the range described above... ultimately there is support for this currency pair around 75c and I would not be surprised at all to see these levels tested in the coming weeks/months.
A convincing break of 75c will see me join the long-term bears and call the Kiwi lower. I am a trader however and don't try to predict the future too often, just look at what is actually happening now. What is happening now is we are moving lower and have support coming up soon (75c), meaning I have a window of opportunity to remain bearish between now (79c) and there (75c).
A bounce upwards off 75c sets us up for moves back to towards 85c again - happy days for traders, happy days for importers.
A break downwards through 75c sets us up for moves lower towards 70c - happy days for traders, happy days for exporters.
Notice that it is happy days for traders, regardless of the direction? We just want direction... we love movement, we love volatility. And best of all right now, the currency markets are suddenly showing us plenty of both.
Nick McDonald is a New Zealander teaching everyday people how to trade the worlds markets via his company Trade With Precision.
