Currency prices around the world are trading lower against a stronger dollar as the price of oil continues to fall and deflation fears in Europe escalate. Thomas Light from Faraday Research notes that last week there was a bounce in non-oil related commodity currencies, which has created an interesting opportunity in the New Zealand Kiwi.

New Zealand remains the world’s largest diary exporter, and dwindling milk supplies drove the NZD higher. The currency also rallied against AUD from a low of NZD 1.0383. Nevertheless, the currency has been trading in an area of price consolidation which began in November. This consolidation has formed a descending wedge formation on the daily candle chart for NZDUSD. Thomas believes that this pattern is likely to break to the downside, as it has done several times over the past few months.

With the price of NZDUSD now at the top of the descending wedge formation, the currency faces multiple resistance levels. The currency pair now offers an interesting risk/reward opportunity according to Thomas. A stop can be placed at USD 0.7880.