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James Hyerczyk
New Zealand Notes

The New Zealand Dollar is trading only slightly lower on Wednesday after a steep sell-off was triggered by the release of the Reserve Bank of New Zealand’s (RBNZ) interest rate decision. Earlier today, the RBNZ cut its benchmark interest rate for the first-time in two-and-a-half years and signaled a 50/50 chance of another easing, sending the Kiwi sharply lower.

At 05:00 GMT, the NZD/USD is trading .6591, down 0.0009 or -0.14%.

The RBNZ lowered the official cash rate (OCR) by 25 basis points to an all-time trough of 1.50 percent, as expected, after switching in March to an explicitly dovish footing on weaker domestic activity and employment headwinds.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed when sellers drove the NZD/USD through the January 3 bottom at .6591 and the April 25 bottom at .6580.

The selling pressure stopped at .6531 and prices rebounded to nearly unchanged. A trade through .6531 will signal a resumption of the downtrend. The next targets are the October 16, 2018 main bottom at .6465 and the October 8, 2018 main bottom at .6424.

A trade through .6686 will change the main trend to up. However, more importantly, today’s price action has put the NZD/USD in a position to post a potentially bullish closing price reversal bottom. If formed, this could lead to a 2 to 3 day counter-trend rally.

The minor trend is down. A trade through .6654 will change the minor trend to up. This will shift momentum to the upside.

The short-term range is .6686 to .6531. Its retracement zone at .6609 to .6627 is the first upside target. Since the main trend is down, sellers are likely to show up on the first test of this level. The short-covering and the counter-trend buying could strengthen if buyers can overcome .6627.

Daily NZD/USD (Short-Term)

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the NZD/USD the rest of the session is likely to be determined by trader reaction to yesterday’s close at .6600.

A close over this level will produce a daily closing price reversal bottom.

Bearish Scenario

A sustained move under .6600 will indicate the presence of sellers. If this move creates enough downside momentum then look for the intraday sell-off to resume. Taking out the intraday low at .6531 will signal a resumption of the downtrend with the next targets .6465 and .6424.

Bullish Scenario

Overtaking .6600 will turn the NZD/USD higher for the session. A sustained move over this level will mean the buying is getting stronger. A close over this level will form a potentially bullish closing price reversal bottom.

The next upside target is the 50% level at .6609. Watch for sellers. The next target is the Fibonacci level at .6627, again watch for sellers. Taking out this level will indicate the buying is getting stronger.

Overtaking .6654 will change the minor trend to up. This could trigger a move into the main top at .6686.

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