NZD/USD Forex Technical Analysis – Bears Hoping for Start of Sharp Break Under .6805

The New Zealand Dollar hit a more than 3-month low on Friday amid concerns around a new variant of the coronavirus found in South Africa. The move was part of the overall sell-off that began on October 21 and accelerated this week after the Reserve Bank of New Zealand (RBNZ) hiked rates only 25 basis points instead of the 50 basis points that 40% of the market had expected.

On Friday, the NZD/USD settled at .6821, down 0.0036 or -0.52%.

It’s anyone’s guess how the New Zealand government and the RBNZ will react to the news of the new variant. Most countries have responded with a travel shutdown from countries of origin of the virus with more moves likely to follow as the variant is tracked domestically. Furthermore, scientists expect to know within two weeks whether the variant is resistive to the vaccine. If it is then expect the government and RBNZ to take more aggressive actions, which could further downside pressure on the NZD/USD.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through last week’s low at .6805 will signal a resumption of the downtrend.

The new minor range is .7053 to .6805. Its 50% level at .6929 is new resistance.

Short-Term Outlook

The fundamentals are bearish and the trend is down. We don’t expect to see a change in trend but there is room for a short-covering rally back to the minor pivot at .6929. Since the trend is down, short-sellers are likely to defend this level.

On the downside, the market pierced the August 20 main bottom at .6806 before stopping at .6805.

This suggests that new bears were unwilling to sell weakness. This solidifies the chances of a counter-trend rally and new shorting opportunity.

If sellers regroup enough to drive the NZD/USD through .6805 with strong volume then look out to the downside. The daily chart indicates there is no major support until the November 2, 2020 main bottom at .6589.