NZD/USD Forex Technical Analysis – Plummeting on Fed Rate Hike Fears

The New Zealand Dollar is sharply lower on Monday as robust U.S. jobs data released on Friday fanned fears of more interest rate hikes to slow economic activity and cool inflation. Recently, the Federal Reserve said a strong labor market would lead to excessive wage growth which, in turn, would lead to inflation pressures.

At 10:36 GMT, the NZD/USD is trading .6302, down 0.0024 or -0.37%.

The Kiwi plunged on Friday as U.S. bond yields climbed as a blockbuster jobs report revived worries about the Fed’s interest-rate outlook.

U.S. Non-farm payroll employment soared by 517,000 jobs in January while economists had expected an increase of 185,000 jobs. The jobless rate slipped to a multi-decade low of 3.4 percent from 3.5 percent.

Traders are now betting the U.S. Federal Reserve could keep interest rates higher for longer without worrying too much about tipping the world’s largest economy into recession. This new development is a major surprise, which comes just days after traders wagered the Fed would end its aggressive interest rate cycle in March.

Daily NZD/USD Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower.

A trade through .6538 will signal a resumption of the uptrend. A move through .6191 will change the main trend to down.

The short-term range is .6191 to .6538. The NZD/USD is trading on the weak side of its 50% level at .6365, making it resistance.

On the upside, the nearest resistance is the long-term 50% level at .6467. On the downside, the nearest support is the long-term Fibonacci level at .6231.

Daily NZD/USD Technical Forecast

Trader reaction to the short-term 50% level at .6365 is likely to determine the direction of the NZD/USD on Monday.

Bearish Scenario

A sustained move under .6364 will indicate the presence of sellers. If this continues to generate enough downside momentum then look for the selling to extend into the long-term Fibonacci level at .6231.

Bullish Scenario

A sustained move over .6365 will signal the presence of buyers. If this move is able to create enough upside momentum then look for a surge into a minor pivot at .6416, followed by a long-term 50% level at .6467.