NZD/USD Forex Technical Analysis – Rangebound Trade Suggests Impending Volatility

The New Zealand Dollar rebounded on Friday after a U.S. government report on growth met expectations, signaling that perhaps it had already been priced into the currency. Nonetheless, the Kiwi still finished lower for the week while continuing to survive inside a month-long trading range.

On Friday, the NZD/USD settled at .6796, up 0.0014 or +0.21%.

The Kiwi rose, the U.S. Dollar weakened and U.S. Treasury yields fell despite a U.S. Gross Domestic Product report that showed the economy grew at a robust 4.1 percent pace in the second quarter.

While posting its best performance since 2014, the report also raised hopes that the economy was positioning itself for even better numbers in the future as it pulls out of an almost ten-year range.

However, this wasn’t the case on Friday. Despite the strong growth in the economy, which should have raised expectations for additional rate hikes by the Fed later in the year, U.S. Treasury yields fell on Friday as investors questioned whether the high growth rates will be sustainable especially in light of historically low levels of unemployment.

Investors followed in line with the thinking of U.S. Federal Reserve officials who are less certain GDP can remain above 4 percent. The central bankers forecast GDP to rise 2.8 percent for all of 2018 but then to tail off to 2.4 percent in 2019 and 2 percent in 2020.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is down because of the closing price reversal top at .7851 on July 26 and the subsequent confirmation on Friday.

A trade through .6762 will indicate the selling is getting stronger. A trade through .6713 will change the main trend to down.

A move through .6851 will negate the closing price reversal top and signal a resumption of the uptrend.

The price action throughout July has been controlled by a series of retracement levels. Based on the close at .6796, support is .6773 and .6766. Resistance comes in at .6805 and .6833.

Daily Swing Chart Technical Forecast

The current chart pattern indicates that the direction of the NZD/USD on Monday is likely to be determined by trader reaction to .6805.

A sustained move under .6805 will indicate the presence of sellers. This could lead to a retest of .6773, .6766 and .6762. The latter is a potential trigger point for an acceleration to the downside with .6713 the next likely downside target.

Overtaking and sustaining a rally over .6805 will signal the presence of buyers. This could trigger a surge into .6833, followed by .6851 and .6859.

Trading inside the .6688 to .6859 for the entire month of July indicates investor indecision and impending volatility. The longer the NZD/USD stays in the range, the greater the breakout potential.