NZD driven by global risk sentiment

10.56 NZST, Wednesday 23 May 2012

NZD driven by global risk sentiment

By Andrew May (Sales Trader, CMC Markets New Zealand)

Markets seem to be at the helm dictating the direction of the New Zealand dollar and its 'on again' 'off again' risk appetite. The Kiwi fell 115pts to breach the week's first support at USD 0.7528 before regaining some composure to open our morning's session at 0.7546.

We're incredibly driven by the consistent fear and anxiety of an impending 'Grexit' and the subsequent risk aversion resulting in its wake. Trader nerves are intensely frayed as they struggle to find returns from dwindling portfolios in trade sessions exhibiting four seasons in one day. Investors are sleeping with one eye open and for good reason. Markets have fallen in late trade and reversed gains into positive territory on comments Greece was making preparations to depart the Euro.

And so the resulting demand and risk appeal for the Kiwi and its commodity driven peers diminishes vastly. Traders are seeking solace for the time being in the highly sought after safe haven depots of the Greenback and Swiss Franc as overseas aversive nature overshadows the glimmer of return.

Don't rule out a bullish upside to the more riskier haven soon either. Gold may be seen to test levels of 1562oz at present, but let’s not forget the impertinence of this commodity that only three weeks ago easily breached resistance USD$100 higher. Gold may provide the bulls a break out not seen since the GFC to push over 2000oz soon.

But for the time being we wait and watch with baited breath on cause and effect. Expect to see the NZD continue to make inroads to the downside. Short term, US73c is on the horizon as falling international commodity prices and softer inflation will throw fuel and act as a catalyst to already waning demand.

ends

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