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James Hyerczyk

The New Zealand Dollar finished lower on Friday as expectations increased that the Reserve Bank will move to cut interest rates on November 13. Rapidly rising U.S. Treasury yields also made the U.S. Dollar a more attractive investment, weighing on demand for the Kiwi by widening the spread between U.S. government bond yields and New Zealand government bond yields.

On Friday, the NZD/USD settled at .6327, down 0.0041 or -0.65%.

Throughout the week, market pricing shifted from a 50 percent chance of a rate cut to a 70 percent chance after data on Thursday showed the seasonally adjusted unemployment rate rose to 4.2 percent in the three months ended September 30, from 3.9 percent in the June quarter.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Friday when sellers took out the last swing bottom at .6334.

The selling pressure began on November 4 with the formation of the closing price reversal top at .6466. A trade through this level will change the main trend to up.

The main range is .6791 to .6204. Its retracement zone at .6498 to .6567 proved to be strong resistance although it was never actually touched during the recent rally.

The intermediate range is .6588 to .6204. Its retracement zone at .6396 to .6441 is new resistance.

The short-term range is .6204 to .6466. Its retracement zone at .6335 to .6304 is currently being tested. This zone is important because aggressive counter-trend buyers are going to try to form a secondary low, while sellers are going to attempt to drive the Forex pair through .6304.


Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at .6327, the direction of the NZD/USD on Monday is likely to be determined by trader reaction to the short-term 50% level at .6335.

Bearish Scenario

A sustained move under .6335 will indicate the presence of sellers. The first target is the Fibonacci level at .6304. This price is a potential trigger point for an acceleration into the nearest main bottom at .6241.

Bullish Scenario

A sustained move over .6335 will signal the presence of buyers. If this is able to generate enough upside momentum then we could see a retest of the intermediate 50% level at .6396.

Side Notes

Watch the price action and read the order flow on the test of .6335 to .6304. If the RBNZ cuts then look for a plunge through .6304. No cut will likely drive the NZD/USD back above .6335.

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