NZD/USD Forex Technical Analysis – August 12, 2019 Forecast

The New Zealand Dollar is inching lower early Monday, but for a third straight session, we’re looking at a pretty tight range following the surprise 50-basis point rate cut by the Reserve Bank (RBNZ) on August 7. Traders were looking for a 25-basis point rate cut by policymakers.

Yes, there was a steep drop after the announcement, but the charts indicate that the move was fueled by sell stops rather than aggressive new shorting. The way I see it, the trigger point for the steep break were stops placed under the May 23 bottom at .6481. Within a day of plunging to .6378, the NZD/USD was already trading back above .6481. This could mean that short-sellers under .6481 were caught in a bear trap. If they are still short then we could see a big short-covering rally if they get squeezed.

Furthermore, some analysts made it sound like the RBNZ unexpectedly cut 50-basis points. This is not true, per se. The central bank was widely expected to cut rates 25-basis points so the surprise was actually an additional 25-basis points. And you can see on the chart that traders may have already absorbed that.

At 07:50 GMT, the NZD/USD is trading .6459, down 0.0008 or -0.11%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6378 will signal a resumption of the downtrend. The main trend will change to up when buyers take out .6791. This is highly unlikely today.

The minor trend is also down. The minor trend will change to up on a trade through .6588. This will also shift momentum to the upside.

The short-term range is .6791 to .6378. Its retracement zone at .6585 to .6633 is the next upside target and potential resistance.

Daily Technical Forecast

Based on the early price action, the direction of the NZD/USD on Monday is likely to be determined by trader reaction to the downtrending Gann angle at .6471. This angle, moving down at a rate of 0.002 per day from the .6791 top has been guiding the Forex pair lower since July 19.

Bearish Scenario

A sustained move under .6471 will indicate the presence of sellers. If this move creates enough downside momentum then we could see an eventual retest of last week’s low at .6378. If this level fails then look for a test of the January 20, 2016 main bottom at .6346. This is a potential trigger point for an even steep break with the August 24, 2015 main bottom at .6207 the next potential target level.

Bullish Scenario

A sustained move over .6471 will signal the presence of buyers. The next targets are the former bottom at .6481 and a minor high at .6499.

Taking out .6499 could trigger an acceleration to the upside since the daily chart indicates there is room to run with the next targets coming in at .6585 and .6588.