NZD/USD Forex Technical Analysis – New Zealand Manufacturing Sector Contracted in October

The New Zealand Dollar is edging higher on Friday after soaring to its highest level since September 13 the previous session. Although the market is being underpinned early in the session, the buying looks a little tentative following a report that showed New Zealand manufacturing activity contracted in October.

At 07:58 GMT, the NZD/USD is trading .6037, up 0.0009 or +0.15%.

Kiwi Rallies as US Consumer Inflation Cools

The NZD/USD recovered from early session weakness on Thursday to post a 2.36% gain as data showed U.S. consumer inflation cooled off a little in October. The news raised hopes that Fed policymakers would adopt a less aggressive approach to rate hikes, weakening the U.S. Dollar.

Struggling Early after Manufacturing Activity Contracts Last Month

The NZD/USD is struggling to follow-through to the upside following yesterday’s stellar performance. Helping to slow the buying is a report showing New Zealand’s manufacturing sector contracted in October for the first time since August 2021, weighed by a sharp fall in new orders and the lowest level of employment activity in a year.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at .6047 will signal a resumption of the uptrend. A move through .5841 will change the main trend to down.

The main range is .6469 to .5512. The NZD/USD is currently trading on the strong side of its 50% level at .5990, making it support.

On the upside, the next resistance level is .6232. On the downside, support is a pair of 50% levels at .5837 and .5779.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at .5990 is likely to determine the direction of the NZD/USD on Friday.

Bullish Scenario

A sustained move over .5991 will indicate the presence of buyers. If this continues to generate enough upside momentum then look for a near-term rally into the main top at .6162, followed by the long-term Fibonacci level at .6232.

Bearish Scenario

A sustained move under .5990 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into a minor pivot at .5944.

Look for buyers on the first test of .5944, but if it fails, look for the weakness to possible extend into the support cluster at .5841 – .5837.

Side Notes

A close under .6028 will form a potentially bearish closing price reversal top. This won’t change the trend, but if confirmed, it could trigger the start of a 2 to 3 day correction.