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James Hyerczyk
New Zealand Dollar NZD/USD

The New Zealand Dollar is trading flat early Tuesday as investors take a breather following three straight days of weakness. The price action has been driven by a combination of a stronger U.S. Dollar and profit-taking after the Kiwi posted a more than two month rally.

The catalysts behind the stronger U.S. Dollar is widening U.S. Treasury yields and expectations of more fiscal stimulus.

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At 02:11 GMT, the NZD/USD is trading .7161, down 0.0001 or -0.01%.

At the start of the trading session on Monday, the spread between the three-month and 10-year U.S. Treasury notes, were at 103 basis points, its steepest since late March and is approaching the 2020 highs of 123 bps. The 10-year yield of 1.10% is the highest since March 19, while the 10-year TIPS inflation break-even inflation rate of 2.07% is the highest since November 2018.

Meanwhile, expectations of more fiscal stimulus was fueled by comments from President-elect Joe Biden late last week. He has promised “trillions” in extra pandemic relief spending. The promise of more stimulus should be fairly easy with the Democrats controlling both houses of Congress.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Monday when sellers took out the last swing bottom at .7153. A trade through .7316 will change the main trend to up, while a move through .7003 will reaffirm the downtrend.

The new minor range is .7316 to .7147. Its 50% level at .7232 is a potential upside target and resistance.

The short-term range is .7003 to .7316. Its 50% level at .7159 is currently being straddled. This level is a potential trigger point for an acceleration to the downside.

The main range is .6589 to .7316. Its retracement zone at .6952 to .6867 is a major downside target and value area.


Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Tuesday is likely to be determined by trader reaction to the pivot at .7159.

Bearish Scenario

A sustained move under .7159 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling pressure to possibly extend into the minor bottom at .7084. This is a potential trigger point for a further decline into the main bottom at .7003 over the near-term.

Bullish Scenario

A sustained move over .7150 will signal the presence of buyers. This could trigger an intraday surge into .7232. Since the main trend is down, sellers are likely to return on a test of this level. They will be trying to produce a potentially bearish secondary lower top.

For a look at all of today’s economic events, check out our economic calendar.

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