NZD Testing Key Retracement Zone for Third Time This Month

The New Zealand Dollar is trading higher on Friday, boosted by increased demand for higher-yielding currencies and renewed interest in commodities. Fundamentally, prices were buoyed by optimism over domestic data and a potentially bullish move by China’s government.

At 06:46 GMT, the NZD/USD is trading .6906, up 0.0023 or +0.34%.

On Thursday, a report showed New Zealand’s gross domestic product (GDP) returned to growth in the final quarter of 2021 as the economy emerged from COVID-19 lockdowns, and economists said the data supported expectations the central bank would raise rates further.

The Kiwi is also being helped by comments from a senior Chinese official who boosted hopes for more stimulus. New Zealand has a tight relationship with China so its currency was affected positively after Xinhua news agency cited Vice Premier Liu He saying China will roll out policy steps favorable for its capital markets.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Thursday when buyers took out the previous main top at .6875. A trade through the next main top at .6926 will reaffirm the uptrend. A move through .6729 will change the main trend to down.

The main range is .7219 to .6529. The NZD/USD is currently testing its retracement zone at .6874 to .6955. This zone stopped rallies earlier in March at .6875 and .6926. Based on this fact, we have to conclude it’s controlling the near-term direction of the Forex pair.

The nearest support is a minor pivot at .6827. This is followed by a short-term retracement zone at .6727 to .6681.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Friday is likely to be determined by trader reaction to the main 50% level at .6874.

Bullish Scenario

A sustained move over .6874 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for a surge into the main top at .6926.

Taking out this level will reaffirm the uptrend with the long-term Fibonacci level at .6955 the next key target. This price is a potential trigger point for an acceleration to the upside with a pair of main tops at .7053 and .7081 the next likely targets.

Bearish Scenario

A sustained move under .6874 will signal the presence of sellers. It won’t change the main trend to down, but it could trigger a break into the pivot at .6827. Buyers could come in on the first test of this level, but if it fails then look for the selling to possibly extend into .6820.