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James Hyerczyk

The New Zealand Dollar is surging early Wednesday as investors express relief following the Reserve Bank of New Zealand’s (RBNZ) decision to leave the official cash rate (OCR) unchanged at 1 percent.

The decision was expected by most economists, even though banks have slashed their near-term forecasts for New Zealand’s economic growth because of the spreading coronavirus outbreak.

At 01:18 GMT, the NZD/USD is trading .6457, up 0054 or +0.85%.

The price action reflects short-covering after many bearish investors bet against the forecasts, hoping the RBNZ would make any earlier than expected rate cut.

The market pricing for a rate cut later this year had risen to more than 50% from about 40% seen at the start of 2020.


Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum shifted to the upside with the formation of a closing price reversal bottom on Tuesday and its subsequent confirmation just a short while ago.

A trade through .6503 will change the main trend to up. A move through .6378 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The main range is .6204 to .6758. Its retracement zone at .6481 to .6378 is currently being tested. This zone is potential support.

The short-term range is .6503 to .6378. Its retracement zone at .6441 to .6455 is the first upside target. This zone is also being tested.

The next major retracement zone comes in at .6498 to .6567.


Daily Technical Forecast

Based on the early price action and the current price at .6457, the direction of the NZD/USD the rest of the session on Wednesday is likely to be determined by trader reaction to the Fibonacci level at .6455 and the downtrending Gann angle at .6458.

Bullish Scenario

A sustained move over .6458 will indicate the buying is getting stronger. This could trigger another surge into a 50% level at .6481, followed by a potential resistance cluster at .6498 -.6499. Sellers could come in on a test of this area.

Bearish Scenario

A sustained move under .6455 will signal the presence of sellers. The first downside target is a support cluster at .6441 – .6439.

If .6439 fails as support then look for an acceleration to the downside with the next target a Fibonacci level at .6416.

If sellers take out .6416 then look for the selling to possibly extend into the main bottom at .6378.

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