It was a brutal week for the New Zealand dollar

Technical Analysis

Author: Adam Button | new-zealand-dollar

NZD was the worst performer

If there is one thing about the market in 2017, it's that it hates political trouble and uncertainty.

An unlikely political coalition arose in New Zealand this week to spell the end of Bill English as Prime Minister. The good news for the new administration is that exports will get a boost from a lower New Zealand dollar.

The trouble has been brewing for a few weeks but it really hit home this week with a 3% drop in NZD/USD.

At the other end of the spectrum is the US dollar, which never really suffers from politics because nothing ever really changes in Washington. Plus, the rules are different when you're the global financial and military superpower.

The weakness in NZD/USD has erased most of the gain in the kiwi this year, with a trip back to the annual lows looming.

The question is: What happens beyond that?

With politics the reaction tends to overshoot, so my guess is that the yearly lows turn out to be a buying opportunity, at least for a few weeks.