NZD/USD Forex Technical Analysis – Pressured by Strong Greenback Recovery Ahead of US CPI Report

The New Zealand Dollar is sharply lower late in the session on Thursday after the U.S. Dollar reversed earlier weakness. Traders are now preparing for the latest reading on U.S. inflation on Friday in the form of the May consumer price index (CPI). Traders are looking for a year-over-year inflation increase of 8.3%, unchanged from April.

At 18:00 GMT, the NZD/USD is trading .6397, down 0.0052 or -0.80%.

US Jobless Claims Rise to Highest Level Since January

U.S. data on Thursday showed the labor market remains very tight, with weekly initial jobless claims rising to a seasonally adjusted 229,000 for the week ended June 4, the highest since mid-January, and above the 210,000 estimate.

RBNZ Plans Sale of NZ Government Bonds

New Zealand’s central bank said on Thursday it plans to start selling government bond holdings in July at a rate of NZ$5 billion ($3.2 billion) every fiscal year, but has not ruled out using quantitative easing again if necessary.

The move is expected to further tighten monetary policy and free up cash for large scale asset purchased in the future, if needed.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6576 will change the main trend to up. The next main bottom target is at .6217.

The short-term range is .6217 to .6576. The NZD/USD is currently testing its retracement zone at .6396 to .6354.

On the upside, the resistance is a long-term 50% level at .6467.

Short-Term Outlook

Trader reaction to the 50% level at .6396 is likely to determine the direction of the NZD/USD into the close on Thursday.

Bearish Scenario

A sustained move under .6396 will indicate the presence of sellers. This could trigger a break into the short-term Fibonacci level at .6354. This level is a potential trigger point for an acceleration to the downside with the long-term Fibonacci level at .6231 the next target.

Bullish Scenario

A sustained move over .6397 will signal the presence of buyers. If this creates enough upside momentum then look for a late-session short-covering rally into the long-term 50% level at .6467.