NZD/USD Forex Technical Analysis – Rally into .6857 to .6876 Sets Up Next Shorting Opportunity

The New Zealand Dollar rose against the U.S. Dollar on Friday amid a small recovery in U.S. Treasury yields which reduced concerns over a potential U.S. recession later in the year. Increased demand for higher risk assets also helped boost demand for the commodity-linked currency.

Earlier in the session, a speech by Reserve Bank governor Adrian Orr contained little to excite traders. The resumption of trade talks between the United States and China also created enough optimism to support the currency.

On Friday, the NZD/USD settled at .6806, up 0.0031 or 0.45%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart despite Wednesday’s steep sell-off. Although the news was bearish this week, sellers were unable to take out a swing bottom to change the main trend to down. A trade through .6744 will change the main trend to down.

Momentum is trending lower, however. It turned down with the formation of the closing price reversal top at .6939 on March 21. It was reaffirmed when the minor trend turned down.

The price action is also being manipulated by a pair of retracement zones. They are controlling both the long-term and near-term direction of the Forex pair.

The main range is .6970 to .6591. Its retracement zone at .6780 to .6825 is controlling the longer-term direction of the NZD/USD. On Friday, the Forex pair finished inside this zone.

The intermediate range is .6591 to .6843. Its retracement zone is controlling the near-term direction of the Forex pair. It is currently support.

The short-term range is .6939 to .6774. If Friday’s closing price reversal bottom is confirmed then look for a 2 to 3 day rally into its retracement zone at .6857 to .6876.

Daily Swing Chart Technical Forecast

Based on Friday’s price action, the direction of the NZD/USD on Monday is likely to be determined by trader reaction to the main Fibonacci level at .6825.

Bullish Scenario

A sustained move over .6825 will indicate the presence of buyers. If this creates enough upside momentum then look for a drive into the retracement zone at .6857 to .6876.

Bearish Scenario

A sustained move under .6825 will signal the presence of sellers. This could trigger a retest of the 50% level at .6780. This is followed by Friday’s closing price reversal bottom and the 50% level at .6767.

The 50% level at .6767 is the trigger point for an acceleration to the downside with .6744 and .6725 the next likely downside targets.