Commodity currency craze

COMMODITY CURRENCY CRAZE - Quite a surge in commodity FX over the past several days, with Aussie, Kiwi and Cad all storming back. The relative strength in these currencies is still rather confounding given the price action in other markets. Consider the lower Euro, still weighed down USD/JPY and EUR/CHF, and the pullback in US equities, and it is quite amazing to see such demand for the risk correlated commodity bloc. The New Zealand Dollar outperformance has been the most unsettling for my portfolio, with this currency now only a stone's throw away from its cyclical highs against the US Dollar. In many ways, it is somewhat understandable to see the rallies in Aussie and Cad, with these markets having been beaten down a good deal in recent months, but with Kiwi still just a kiss away from its high, there is something that just doesn't feel right about it all.

UNSETTLING KIWI - I understand the economy has held up well, and interest rates are expected to keep rising, all of which would be inherently supportive of a higher Kiwi rate, but at the same time, there are external pressures that I would have thought should have been playing a larger role with respect to the direction of the currency. External themes are far less supportive and should therefore have some weighing influence. Technically, as highlighted above, the currency looks like it should be near a top, and in the process of carving out a longer term peak. But at this point, we need to see NZD/USD break back below 0.8600 at a minimum to encourage prospects for a potential bearish reversal. I already have short NZD exposure through the USD and Euro, and will be looking to see if we can get that anticipated reversal over the coming sessions. I'm not quite sure what the exact catalyst for Kiwi weakness will be, but I am rather confident that something is around the corner.