NZD/USD Forex Technical Analysis – Main Trend is Up, But Momentum is Trending Lower

The New Zealand Dollar is edging higher on Thursday after hitting its lowest level since November 30 the previous session. Traders are still trying to assess the impact of the BOJ’s surprise policy decision on Tuesday which affected the Kiwi by blowing up the carry trade.

At 04:42 GMT, the NZD/USD is trading .6319, up 0.0024 or +0.38%.

The BOJ’s move appears like an interest rate hike although policymakers left the official interest rate at -0.10% on Tuesday. That being said, the decision helped drive the Japanese Yen higher against all major currencies. In doing so, it blew up the carry trade, where investors in New Zealand borrowed in cheap Yen to investment in a number of assets.

A jump in Japanese Government bond yields after the announcement made the carry trade more expensive, forcing New Zealand investors cover their positions by selling Kiwi and buying Yen to pay back their borrowed money. This drove the New Zealand Dollar lower.

NZD/USD traders are now trying to regroup from the sell-off although they face further downside pressure. However, they could get a lift in the current low volume environment if investor sentiment continues to improve.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending lower. A trade through .6156 will change the main trend to down, while a move through .6514 will signal a resumption of the uptrend.

The minor trend is down. It changed to down on Wednesday when sellers took out the last minor bottom at .6302. This also shifted momentum to the downside.

The nearest support is a long-term Fibonacci level at .6231, followed by a short-term 50% level at .6177.

The resistance is a pair of minor 50% levels at .6335 and .6396, followed by a long-term 50% level at .6467.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at .6335 is likely to determine the direction of the NZD/USD on Thursday.

Bullish Scenario

A sustained move over .6335 will indicate the presence of buyers. This could lead to a labored rally with potential targets coming in at .6396 and .6467. The latter is the last potential resistance before the .6514 main top.

Bearish Scenario

A sustained move under .6335 will signal the presence of sellers. Taking out .6277 will indicate the selling is getting stronger with the next two targets .6231 and .6177. The latter is the last potential support before the .6156 main bottom.