The Kiwi, or NZD/USD, has been in a steady downward trend since February. The downward trend in the pair is due to slowing growth in New Zealand, slowing inflation, and the increasing probability that the Reserve Bank of New Zealand (RBNZ) will cut interest rates later this year.

You can read more of the fundamental story driving the NZD/USD lower by following the link below to Bloomberg:

New Zealand Dollar to Fall, Says Bank of New Zealand

The RBNZ has interest rates set at 8.25 percent. These are the highest rates among developed nations, making the NZD a favorite target currency for the carry trade. A cut in these rates should result in a rapid liquidation of carry trades and a quick move lower in the NZD.

The one thing that the NZD has going for it is the continued rally in commodity prices. New Zealand's chief export is food. As the price of food goes higher, the currencies of countries that export food become more valuable.

Although rising food prices are helping the NZD a little bit, the overwhelming trend is negative due to the prospects of recession and rate cuts. Just look at the rolling pattern of lower lows and lower highs in the NZD/USD.

My sense is that a new lower high was traced last week near 0.7650. You can use that mark as a risk management level. To the downside, I expect the NZD/USD to work its way toward 0.7000 over the next 3 to 6 months.

NZD/USD Daily Chart and 100 Pip Box Size Point and Figure Chart