NZD/USD Forex Technical Analysis – Next Big Challenge for Bullish Traders is 50% Level at .7204

The New Zealand Dollar is trading lower on Friday, however, the Kiwi is still likely to end the week with solid gains as the prospect of early interest rate hikes widened its yield advantage over Treasuries.

The kiwi jumped earlier in the week to its highest level since February 26 when the Reserve Bank of New Zealand (RBNZ) shocked many by projecting a rate hike as early as the middle of next year, making it one of only a handful of central banks to talk of tightening.

At 11:19 GMT, the NZD/USD is trading .7242, down 0.0052 or -0.71%.

At 12:30 GMT, investors will get the opportunity to react to April’s U.S. personal consumption expenditures price index (PCE), a key measure of inflation, and the one watched closely by the Federal Reserve.

Besides the RBNZ, Kiwi traders have been monitoring U.S. inflation data, as the Fed has said it will let it run hotter, arguing that any rising price pressures are “transitory.” Some traders believe the Fed is moving closer to seriously discussing tapering its current bond purchases. This could underpin the U.S. Dollar and cap gains in the New Zealand Dollar.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7316 will signal a resumption of the uptrend. A move through .7135 will change the main trend to down.

The main range is .7465 to .6943. The NZD/USD is currently trading inside its retracement zone. Trader reaction to this area could determine the near-term direction.

The short-term range is .6943 to .7316. Its retracement zone at .7129 to .7085 is support.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Friday is likely to be determined by trader reaction to the main Fibonacci level at .7266.

Bullish Scenario

A sustained move over .7266 will indicate the presence of buyers. If this move is able to create enough upside momentum then look for the rally to possibly extend into this week’s high at .7316.

Bearish Scenario

A sustained move under .7265 will signal the presence of sellers. The first downside target is the main 50% level at .7204. Since the main trend is up, we could see a technical bounce on the first test of this level.

If .7204 is taken out by increasing selling volume then look for the selling to possibly extend into the main bottom at .7135.