NZD/USD Trading Tutorial

The Land of the Long White Cloud was one of the first to wage a successful war on Covid. Keeping the citizens healthy was more important than financial concerns. When it seemed as if the battle with the pandemic had been won, New Zealand experienced a financial spurt. The strategy the government implemented has led to an interesting situation in the Forex market. The NZD/USD Forex pair is considered one of the minor Forex pairs. Surprisingly, more traders have shown an interest in this pair recently.

Is NZD going up or down?

Although the candlestick chart shows a few dips, the general trend of the NZD is showing a slow upward trend. Many top investors claim that it is a bullish market. But as with everything in life, there are a few detractors. These people recommend that the market tends towards being bearish, and now may be a good time to relook your investments.

Coronavirus has had an impact on every aspect of life. Forex trading has not been exempt. One of New Zealand’s prime financial sources is exporting dairy products and other foodstuffs. During Corona, borders were close in an attempt to contain the virus. Corona closed the avenue of exports.

If we look at an average forecast for a week, the ratio is 5:4 in favor of a bullish market. The monthly forecast results in a ratio of approximately 6:3 in favor of a bullish market. With this ratio, predictions are that it would be a good move to invest in nzdusd. And lastly, a quarterly forecast gives the ratio of approximately 5:2. So if experts are followed, this is a forex pair to be considering.

If you want to enter the Forex market with the nzdusd pair, experts advise that you look at it as a carry trade. Carry trade happens when you have a Forex pair that you sell when the interest is low, and you use the cash from that transaction to buy a Forex pair that trades with a higher interest rate.

If the United States Dollar is experiencing a low, that will be the perfect opportunity to invest in this pair. Its exchange rate is hovering in the area of $1 NZD = $0.69 USD. In this last quarter of 2021, banks expect the exchange rate to be $1 NZD =$ 0.7 USD. Nothing extreme – just a steady increase in the exchange.

The New Zealand Dollar (also known as the Kiwi) fluctuates as the United States Dollar fluctuates. However, a rise in the USD sparks a dip in the NZD. If the USD becomes weaker, NZD becomes stronger. So now, apart from keeping a daily eye on this Forex pair, an investor needs to examine the USD. If they sense a fluctuation in the USD, it will help them decide whether or not to sell that Forex pair.

Investors must also keep an eye on the movement of commodities in New Zealand. New Zealand is dependent on its export trade. When their exports are in high demand, the price increases and the New Zealand dollar will move to a stronger position. And the reverse will happen if the cost of exports decreases.

Most of New Zealand’s trading power is in agricultural goods like powdered milk, cheese, etc. It has a large population of sheep, which also adds to the value of its exports. Because agriculture features predominately in New Zealand trade, weather conditions will impact the healthy state of the NZD. Historical records show that the extremes very seldom move out of the expected zones.

New Zealand’s population is small, but this has little impact on its ability to trade as forcefully as many other countries. Their trade is in exports to Australia, Japan, and The United States of America. According to the World Bank, New Zealand is the second most business-friendly country in the world.

Its small population implies a small economy. This is not true because it ranks high on the list of the world’s wealthiest nations. Its strength lies in its trading power. Although many of its exports are agricultural, it also exports metals, mining equipment, and wood.

New Zealand has become one of the prime countries for immigration. As more people immigrate, the population increases. More people mean more food and other commodities are required. The increase in sales bolsters the whole economic situation in the country. The better the economy, the more people want to invest. Their immigration policy has a positive impact on their viability as a Forex pair. The nzdusd will have a stronger appeal.

Why is the NZD so strong?

New Zealand’s central bank is called the Reserve Bank of New Zealand. The Reserve Bank sets economic policy. It strives to regulate financial operations. The bank was responsible for raising the interest rates in an attempt to stabilize the New Zealand dollar. The high-interest rates have strengthened the New Zealand dollar. The strengthened New Zealand dollar has led to more people wanting to invest in the commodities of New Zealand. The run-off effect of this has been to increase the value of the New Zealand Dollar.

Australia and New Zealand are trade allies so it stands to reason that what affects Australia’s finances will have a bounce-off effect on the New Zealand Dollar.

New Zealand and Australia (one of New Zealand’s many trade buddies) have a high-interest rate compared to the United States of America. Investors like to invest when interest rates hike. When the interest rate is high, cash flows in. When money flows into a country, Forex trading that involves that country will climb, establishing a bullish market.

As New Zealand trades mainly in agricultural products, the performance of the New Zealand dollar is linked to its trade. With borders opening, the trade corridors are opening, and the New Zealand dollar will be affected positively. Tourism is also a developing commodity in New Zealand. As the borders open, tourism will once again benefit the exchange rate of the New Zealand dollar.

As the demand for New Zealand agricultural products increases, the demand for the New Zealand dollar as one of the Forex pairs increases. This gives a healthy aspect to the New Zealand dollar, increasing its strength against other currencies. Covid stirred up a negative GDP, but New Zealand (as is the world) is recovering, and its dollar is becoming stronger.

Commodities are a strong indicator of the financial strength of a country. With open borders, New Zealand’s popular dairy products, wool, food, and live animals are being traded in larger quantities. This lively trade rubs off on the monetary value as compared to many other countries. It also signifies strength in the nzdusd trade.

The Reserve Bank of New Zealand strives to stabilize prices. The Reserve Bank is also responsible for setting the inflation rate. Its inflation rate is a yearly increase of 1.5%. The Reserve Bank watches price fluctuations daily. This daily watch helps to see how much money is needed to be a stable participant in the Forex pairs market.

As the world opens up and New Zealand’s trade with other countries strengthens, the New Zealand Dollar strengthens. When the New Zealand dollar is strong it features favorably in any Forex pair including nzdusd.

The nzdusd is also subject to the position of the United States dollar. Many top financiers are predicting a dive for the American Dollar. It is definitely in a poorer situation than it was pre-Covid. The strategy to protect investments and exports by keeping the borders open has not worked in the United States favor. The rest of the world treated the pandemic seriously and tried to contain it by closing the borders. Although it was a strain financially and socially, locking out the virus had benefits in the long run.

Top United States economist Stephen Roach predicts that the dollar will weaken towards the end of the year. He attributes part of the reason for the decline to new Covid infection rates. Another reason is that the savings of individuals, businesses and the government has decreased. If he is right, and the dollar does devalue it will put the New Zealand dollar on a firmer footing in the Forex nzdusd trade.

What NZD means?

NZD stands for New Zealand Dollar. It is a recognized abbreviation when dealing with Forex pairs. The New Zealand dollar is represented as NZ$ when viewing it from an international perspective. When living in New Zealand one would use the dollar sign ($) by itself. The New Zealand dollar is made up of 100 cents that are it is a metric currency. The New Zealand dollar is made of a plastic material. It is hard to counterfeit these notes. These notes can even go through a wash cycle with no damage.

A strong New Zealand dollar gives more buying power to its citizens. It also gives a sense of global wealth. It is a major currency. It features strongly as a favored part of a Forex pair. Even though Trading with nzdusd is not one of the major trading Forex pairs, it is a popular Forex pair.

It is the currency of New Zealand (obviously) but other places use it. It is used in The Pitcairn Islands, Cook Island, Tokelau, and Niue. New Zealand has strong ties to those Islands and countries.

When Kiwis want to travel, they should choose destinations that will give them more value for their dollar. A popular holiday retreat in Hong Kong. With Vietnam, Indonesia, and China running close seconds. Surprisingly your New Zealand dollar will also fare well in the United States of America.

When it comes to safety in a country, New Zealand is right at the top. Crime rates are low, and tourists can sightsee in absolute safety. This makes it popular with tourists and immigrants. Many people who are tired of high crime rates will immigrate to New Zealand. The stability of the New Zealand dollar is also an incentive to people coming from an unstable economy.

The New Zealand dollar is closely linked to its economic situation. As borders open up, trading with New Zealand will increase and the New Zealand Dollar will benefit.

Originally New Zealand followed the British monetary system with pounds, shillings, and pence being the currency. But mid-1960’s that changed when New Zealand went the decimal route. The queen featured prominently in the money system with the heads of coins and notes featuring her image, but gradually things changed. Famous local people and local birds, animals, and plants are featured on coins and notes.

What time does NZD USD open?

The trading hours will depend on where you are staying. The most popular time zone for trading with New Zealand dollars is Central European Time. Trading is open for almost twenty-four hours. From Monday to Thursday, you can trade your nzdusd from midnight to 23:00 hours. You can take a fifteen-minute break and then continue to midnight. Strangely, there is a fifteen-minute break instead of allowing trading to continue continuously from Monday to Thursday. The market will then close at 22:00 hours on Friday. You get a free weekend, and you can start again at midnight on Sunday.

There are slumps in the market that ties in with traveling from work to home and mealtimes, but apart from those suspect, fifteen minutes trading will still be allowed. Remember Forex trading occurs worldwide, so there is always someone awake during the week.

Because Forex markets run continuously from 0:00 Monday to midnight Friday (United States of America time), there is ample time for traders to see to their investments. New Zealanders can start their trading on Sunday night (CET) as it will be Monday morning in New Zealand.

Trading has four main sessions. Sydney session is where New Zealanders do their trading times will be the same as Sydney trading times. There are also the Tokyo, London, and New York sessions. There is overlap with two or more of these sessions.

During the Tokyo session, Australia and New Zealand will be active, and trading in the nzdusd will be brisker than at any other period. This session will see brisk trade between Australia, Japan, and New Zealand. The most common trading pairs will be between these countries and the United States of America.

Forex does not operate over the weekends and only observes two holidays, Christmas day and New Year’s Day. Local holidays will affect trading in that particular Forex pairs.

Countries that have daylight savings will have changes to their schedules. So changes will occur in March, April, October, and November.

If you get confused about the times when you can trade nzdusd, you are not alone. Fortunately, there are tools that you can use to get over the confusion of these times and restrictions.

When the United States and New Zealand are awake, trading will be brisk. Before you can trade Forex pairs you need to find an intermediary. The person who can advise you and help you invest by providing you with leverage, or a loan. That person is called a broker. Most brokers are attached to a firm of brokers.

So what must you look for in a broker? You must choose an approved Financial Markets Authority (FMA) broker. FMA will make sure that their brokers have been trained and that they have a record of unblemished trading.

Every Forex broker works remotely. They use one or more trading platforms. You need to try the platforms out to see if you are comfortable in that environment. You need to see how they show the trading graphs. Can they help you understand the trading graphs? Are they available for questions? Your Forex pair could change rapidly in a few minutes so you don’t want to wait till the end of the day to get email advice. Another thing to look for is their selection of offered commodities.

To get you started on your quest, I would like to breakdown down three brokers to start your search

  • RoboForex is a reliable broker. It is regulated by the International Financial Services Commission. Your funds can be withdrawn 24/7.
  • Markets.com is a safe brokerage company. Because it operates on lower deposits it is considered a market maker. It primarily deals with the smaller trader and allows minimum deposits.
  • VantageFX is an Australian brokerage firm. It is a global firm so New Zealanders will find trading comfortable. It is a safe platform as it is regulated by the Australian Securities and Investments Commission (ASIC). They advertise fast trading through many banks.

For a bank or brokerage firm to trade Forex in New Zealand they have to be endorsed by the Financial Markets Authority (FMA). FMA regulates New Zealand’s financial trading.

Traders should check the company’s credentials before signing up to do Forex trading. Some of the other things to keep in mind are:

  • What fees do they charge for transactions?
  • What is their leverage policy?
  • What is their margin call policy?

If all checks out, you will have happy trading in a popular Forex pair – nzdusd.

Steps in Forex trading the NZD/USD pair

  1. Find a forex broker that will answer your queries and help you along the way. In other words, one that you have confidence taking into your corner.
  2. Sort out which currencies you want to trade. With Forex pairs, you are buying one currency with another currency. So nzdusd means that you are using NZD to buy USD.
  3. Watch the market and keep a journal of what is happening with your chosen Forex pair. It will help you decide if you want to trade.
  4. Check that the quoted exchange rate suits you. Remember, the broker has his cut. His cut is the difference between the two currencies quoted.
  5. There are two ways that you can take with Forex pairs. These ways are known as a position. The first in the Forex pair is called the base currency, and the second one is the quote currency.
  • If you think that NZD will move up, you are in what is known as a buy position. This is a bullish trade.
  • A sell position is the reverse. You are banking that the base currency will drop. This type of trade is called a bearish trade.

Strategies for trading NZD/USD

Part-time traders do not have the time or the focus to spend on their trading. There are “watchdogs” they could employ to keep track while they are not actively involved.

Stop-Loss orders

Traders could implement a stop-loss order. This order will prevent you, the trader from running into debt should the Forex pair start to behave badly. You could set this up when you start to trade the pair or you could step in and do it later if you are worried about the performance of nzdusd. 

Research

You need to research your Forex pair. Keep track of it for as long as necessary. It will help establish whether or not nzdusd is going to be profitable for you. Watch for trends.  Choose a trend that is moving forward, rather than wait for it to reach a peak. 

Emotions

You cannot afford to be an emotional trader. Don’t deal with too many or too few trading pairs. Don’t let your nerves cause you to be trigger happy which will cause you to sell too early. A few Forex pairs can consolidate your place in the market. Let your pair rest. The market is volatile, and a dip at noon may be converted to a gain at 3 pm.

Do not be attracted to markets that everyone else is going for without doing your research. It is so easy to be swept away on a tidal wave of investments.

Demo Account

A demo account is useful. Once you have selected nzdusd, run it on a demo account to observe look how it is trading. As soon as you are confident that nzdusd is the Forex pair for you start trading for real. Don’t operate a demo account for ages a maximum of a month should clarify your choice.

Protect your trade

Because your trade could plummet while you sleep, you need to take precautions to protect your investment. A stop-loss order will slam the door closed on your trading if there is a possibility that you will lose more than you can afford.Keep an eye on the news for Mexico and the United States. Bad news or good news will cause fluctuations in the market.

Leverage

Be aware that leverage will help you make a better profit, but it can also put you in a position where you lose more than you can afford to lose. So use leverage wisely.

Different types of trading

Scalper: You may choose to be a scalper. If this is your path you will need nerves of steel and be prepared to hop in and out of your trades within tiny time frames. Scalping requires fast reaction times and can become stressful.

Day trading: Decide if you want to restrict your trade to trading when you are awake. To do this you will close all your trading before retiring. This way you will not get surprises (fortunate or unfortunate) when you wake up.

Swing trading: You let your pair rest for days or weeks, taking dips and peaks in your stride, hoping that it will all even out in your favor. 

Position trading: You will not be concerned about minor changes. You will not watch your Forex pair minutely every day. 

Conclusion

Mexico is an emerging economy and is looking good for investment in the Forex pair USD/MXN. The situation will improve even more as the borders open to tourists. Money coming in to Mexico will stabilize the economy.

Forex trading needs a clear, unemotional standpoint as it is a risky business for those who are not careful. Do not regard Forex as an investment. Rather think of it as trading. So what is the difference? Investment usually means that you can rest on your laurels, nothing much is going to happen to your chosen investments in the short term. With Forex you need to be actively keeping a continuous eye on your pair.

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Contact

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