NZD/USD: Enough Downside Momentum to Challenge .6631

The New Zealand Dollar is trading sharply lower on Friday as investors reacted to Federal Reserve officials including Chair Jerome Powell offering further signposting of aggressive interest rate hikes this year.

A half-point interest rate increase will be “on the table” when the U.S. central bank meets on May 3-4 to approve the next in what is expected to be a series of rate increases this year, Powell said.

At 08:03 GMT, the NZD/USD is trading .6687, down 0.0046 or -0.69%.

With inflation running roughly three times the Fed’s 2% target, “it is appropriate to be moving a little more quickly,” Powell added in a discussion of the global economy at the meetings of the International Monetary Fund (IMF).

In other news, analysts noted the chance of a surprisingly high inflation reading looked to have diminished a little after New Zealand’s CPI came in just under forecasts on Thursday.

The data fueled a rally in the debt market at first, but that changed overnight amid all the hawkish talk abroad. As a result, two-year swap rates jumped 12 basis points to 3.685% and heights not visited since early 2015.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed early Friday when sellers took out the minor bottom at .6715. A trade through .6902 will change the main trend to up.

The minor trend is also down. A trade through .6814 will change the main trend to up and shift momentum to the upside.

The main range is .6529 to .7034. The NZD/USD is trading on the weak side of its retracement zone, making it resistance.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Friday is likely to be determined by trader reaction to the main Fibonacci level at .6722.

Bearish Scenario

A sustained move under .6722 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the February 24 main bottom at .6631. Taking out this level will reaffirm the downtrend.

Bullish Scenario

Overtaking .6722 will indicate the short-covering is getting stronger. If this creates enough upside momentum then look for the rally to possibly extend into the main 50% level at .6782.