NZD/USD Forex Technical Analysis – Confirmation of Closing Price Reversal Bottom Shifts Momentum to Upside

The New Zealand Dollar is edging higher early Monday as risk appetite improved with equities gaining and benchmark government bond yields moving higher. The early strength is likely being fueled by short-covering and position-squaring after the currency was routed last week. Last week the Kiwi sunk to a multi-month low after the Reserve Bank of New Zealand (RBNZ) delayed its plans to raise interest rates due to newly imposed COVID-related lockdowns.

At 02:53 GMT, the NZD/USD is trading .6852, up 0.0016 or +0.23%.

Despite today’s early rally, the near-term outlook for the U.S. Dollar remained upbeat, meaning any gains by the Kiwi are likely to be capped.

The position-squaring should not come as a major surprise as many of the major players take to the sidelines ahead of the central bankers’ summit at Jackson Hole, Wyoming on August 26-28. Traders are hoping the Fed clarifies its plans to taper bond purchases before the end of the year.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has shifted to the upside with the confirmation of Friday’s closing price reversal bottom. The move won’t change the main trend to up, but it could trigger the start of a 2 to 3 day counter-trend rally.

A trade through .6806 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend will change to up on a move through .7086.

The minor trend is also down. A trade through .7062 will change the minor trend to up. This will confirm the change in momentum.

The first upside target is a long-term Fibonacci level at .6924. This is followed by a minor pivot at .6948. Both levels are potential resistance.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Monday is likely to be determined by trader reaction to .6845 and .6837.

Bullish Scenario

A sustained move over .6845 will indicate the presence of buyers. If this move is able to generate enough near-term momentum then look for the rally to possibly extend into .6924 – .6948.

Bearish Scenario

A sustained move under .6837 will signal the presence of sellers. The first downside target is the new minor bottom at .6806. This price is a potential trigger point for an acceleration to the downside with the November 2 main bottom at .6589 the next major downside target.