NZD/USD Forex Technical Analysis – Lower as Risk Sentiment Dips Ahead of ECB Rate Hike Decision

The New Zealand Dollar is trading lower on Thursday, pressured by a stronger U.S. Dollar, weak domestic data and lower demand for risky currencies.

One catalyst driving demand for the safe-haven U.S. Dollar is the resignation of Italy’s Prime Minister Mario Draghi on Thursday. The move is expected to pave the way for fresh elections and renewed political uncertainty in the region. Furthermore, it could prove to be particularly challenging for the European Central Bank as it prepares to lift interest rates later today.

AT 09:58 GMT, the NZD/USD is trading .6196, down 0.0035 or -0.56%.

The Drahi resignation news is driving investors out of riskier assets including commodities, which is weighing heavily on demand for the currency-linked New Zealand Dollar.

In economic news, New Zealand posted a monthly trade deficit of NZ$701.00 million in June, data from Statistics New Zealand showed on Thursday, while the annual deficit was NZ$10.51 billion. Exports totaled NZ$6.42 billion for the month while imports were NZ$7.12 billion.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through .6396 will change the main trend to up, while a move through .6061 will signal a resumption of the downtrend.

The minor trend is up. This is controlling the momentum. A trade through .6141 will change the minor trend to down. A move through .6272 will signal a resumption of the minor trend.

On the upside, the nearest resistance is the long-term Fibonacci level at .6232. This price is controlling the near-term direction of the Kiwi.

On the downside, the closest support is a minor pivot at .6166. This is the last potential support before the minor bottom at .6141.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term Fibonacci level at .6232 is likely to determine the direction of the NZD/USD on Thursday.

Bearish Scenario

A sustained move under .6231 will signal the presence of sellers. The first downside target is the minor pivot at .6166, followed by the minor bottom at .6141. This level is a potential trigger point for an acceleration to the downside with plenty of room to break before hitting the main bottom at .6061.

Bullish Scenario

A sustained move over .6232 will indicate the presence of buyers. This could trigger a surge into the new minor top at .6272.

Taking out .6272 will indicate the minor trend is getting stronger with the 50% level at .6319 the next target. This level is a potential trigger point for an acceleration into the main top at .6396.