Friday, November 04, 2005

Revisiting FOREX (NZD/USD)

I've posted a couple of different times about the attractive short position in NZD/USD (which basically means the New Zealand Kiwi should fall in relation to the US Dollar).

This continues to be a good trade. Over the past several days the US Dollar has been very strong, so NZD/USD continues to get pounded.

As the graph below demonstrates, these markets are extremely volatile (the graph on the left is the past several days of the EUR/USD and on the right is NZD/USD). As the highlighted portion shows, these markets can spasm on news in one direction and then flip around and rush the other direction. Trying to trade on too short a time horizon is almost always a money-losing proposition in the FOREX markets.

I am not sure if NZD/USD is temporarily oversold at this point; it was definitely hammering out a short-term bottom near the end of trading today. The big picture remains superb for shorts. But, having fallen so far, it isn't as safe a bet in the short term since it could recover to the upside. Over the course of weeks and months, however, this still looks terrific.


John Jagerson said...

Fridays in the forex are funky. I think we should be careful about identifying a bottom in the afternon since volume dries up to almost nothing. However, the fact remains that the market has stalled for the last several hours at the .682- for a while. I am shooting for an ultimate low of at least .65. I have based that on past performance rather than an obvious support level.

Anonymous said...

Ever thought about helping out people like this guy?