NZD/USD Forex Technical Analysis – Potentially Bullish Trend Change Puts .6878 Pivot on Radar

The New Zealand Dollar edged higher on Thursday as investors downplayed the impact on the global economy of the Omicron coronavirus variant, leading to increased demand for higher-yielding currencies.

With economic damage from Omicron dampened, the New Zealand Dollar could get a further boost if the Reserve Bank of New Zealand (RBNZ) returns to its aggressive interest rate hike path.

On Thursday, the NZD/USD settled at .6825, up 0.0013 or +0.19%.

The RBNZ has already hiked twice to 0.75% and is widely expected to move to 1.0% at its February 23 policy meeting. Another four hikes are then tipped by October next year.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. For a second time this month the NZD/USD changed the main trend to up. The first change in trend was likely fueled by short-covering. It failed at .6834. The second change in trend occurred on Thursday when buyers took out .6834, leading to a test of .6841.

The short-term range is .6868 to .6702. The NZD/USD is currently trading on the strong side of its 50% level at .6785, making it potential support.

The intermediate range is .7053 to .6702. Its 50% level at .6878 is the next likely upside target.

We could see sellers on the first test of .6878, but overtaking it could trigger an acceleration to the upside with the next target a major retracement zone at .6961 to .7022.

Short-Term Outlook

Closing over the pivot at .6785 on Thursday may have created enough upside momentum to continue the rally over the short-run.

Our first objective is a potential resistance cluster formed by the main top at .6868 and the 50% level at .6878. Watch for sellers on the first test of this area.

Look for a strong upside bias to develop on a sustained move over .6878. This may create enough upside momentum to trigger an acceleration into at least .6961.

A failure to overcome .6878 will indicate the return of sellers. If this move creates enough downside momentum then look for test of .6785. A failure at this price will be a sign of weakness, but keep in mind that a pullback into this area could also be attractive to buyers, so be careful selling weakness.

Basically, look for the upside momentum to continue as long as .6785 holds as support. And for it to increase if buyers can overcome .6878.