NZD/USD Forecast – Weak as Investors Book Profits Ahead of Weekend

The New Zealand Dollar is trading lower on Friday after hitting its highest level since August 18 the previous session. The price action suggests investors may be booking profits ahead of the weekend after surging on Wednesday and Thursday in response to a less-hawkish Federal Reserve. Also weighing on the Kiwi is a stronger U.S. Dollar and firmer U.S. Treasury yields.

At 10:44 GMT, the NZD/USD is trading .6247, down 0.0019 or -0.30%.

There are no major economic releases today, but traders may be responding to reports that China’s capital city of Beijing may be grinding to a near standstill due to stricter COVID controls.

The Kiwi is being underpinned by two key factors:  The Fed is turning less-hawkish and the Reserve Bank of New Zealand (RBNZ) has turned more hawkish.

On Wednesday, the Fed minutes revealed that the U.S. central bank could now move in smaller steps, with a 50 basis point rate rise likely next month after four consecutive 75 basis point increases. Meanwhile, on Tuesday the RBNZ announced a historic 75 basis point rate hike with another one to follow in February.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6289 will signal a resumption of the uptrend. A move through .5841 will change the main trend to down.

The minor trend is also up. A trade through .6088 will change the minor trend to down. This will shift momentum.

The NZD/USD is currently testing a long-term retracement zone at .6231 to .6467. On the downside, the first support is a minor 50% level at .6177. The second support is a minor 50% level at .6065.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term Fibonacci level at .6231 is likely to determine the direction of the NZD/USD on Friday.

Bullish Scenario

A sustained move over .6232 will indicate the presence of buyers. Taking out .6289 will indicate the buying is getting stronger. This could trigger an acceleration into the long-term 50% level at .6467.

Bearish Scenario

A sustained move under .6231 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to extend into .6177.