NZD/USD Forex Technical Analysis – Reaction to .6341 Sets Tone after RBNZ Expected Rate Hike

The New Zealand Dollar finished sharply lower on Tuesday as recession worries weighed on commodity prices amid concerns that the Federal Reserve will continue its steep interest rate hikes despite nascent signs of a slowdown in inflation.

Domestically, Kiwi traders are preparing for the Reserve Bank of New Zealand (RBNZ) monetary policy statement and interest rate decision, due to be released at 02:00 GMT. The price action suggests expectations of a 50 basis-point rate hike have been fully-priced into the currency.

On Tuesday, the NZD/USD settled at .6346, down 0.0020 or -0.31%.

Last week, Reuters released a poll showing the RBNZ is expected to increase the Overnight Cash Rate (OCR) by 50 bps to 3.00%, which would be its most aggressive tightening move since 1999.

Following the release of the RBNZ decisions, traders will quickly shift their focus to the U.S. Retail Sales report, due to be released at 12:30 GMT and the Federal Open Market Committee’s (FOMC) July meeting minutes at 18:00 GMT.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6469 will signal a resumption of the uptrend. A move through .6212 will change the main trend to down.

The short-term range is .6212 to .6469. The NZD/USD is currently testing its retracement zone at .6341. Additional support comes in at .6265 and .6231.

On the upside, resistance is a long-term 50% level at .6467, followed by a second 50% level at .6548.

Daily Swing Chart Technical Forecast

Trader reaction to .6341 is likely to determine the direction of the NZD/USD early Wednesday.

Bullish Scenario

A sustained move over .6341 will indicate the presence of buyers. The first upside target is a minor pivot at .6404. A failure to overcome this level will be another sign of selling pressure. Overtaking it, however, could spike prices into the resistance cluster at .6469 – .6470.

Bearish Scenario

A sustained move under .6340 will signal the presence of sellers. If this move creates enough downside momentum then look for a steep break into a pair of retracement levels at .6265 to .6331. This is the last potential support before the main bottom at .6212. A trade through this level will change the main trend to down and could trigger an acceleration to the downside.