NZD/USD Forex Technical Analysis – Reaction to .6961 Sets the Tone; Ripe for Closing Price Reversal Bottom

The New Zealand Dollar is under pressure again on Wednesday as a skid in global share markets and a sell-off in U.S. Treasuries slugged risk sentiment and sent domestic bond yields to multi-month highs.

New Zealand bonds have been faring worse than U.S. Government bonds as the Reserve Bank of New Zealand (RBNZ) is considered certain to raise interest rates by a quarter point at its October 5 meeting to 0.5%, and likely to move again in November.

10-Year bond yields topped 2.0% for the first time since March last year, when a convulsion in global markets caused a brief spike as far as 2.048%. Before that, yields had not been above 2.0% for any sustained period since early 2019.

At 05:33 GMT, the NZD/USD is trading .6949, down 0.0012 or -0.18%.

The weakness in demand for riskier assets is expected to keep the pressure on the Kiwi, but traders should be leery of a quick snapback rally if the global equity markets start to mount a strong comeback rally.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .6937 will signal a resumption of the downtrend. The nearest main bottom is .6806.

A trade through .7157 will change the main trend to up. This is highly unlikely but due to the prolonged move down in terms of price and time, today’s session begins with the NZD/USD inside the window of time for a closing price reversal bottom.

The minor trend is also down. A trade through .7093 will change the minor trend to up. This will also shift momentum to the upside.

On the downside, the nearest support is a long-term Fibonacci level at .6924.

On the upside, potential resistance targets are layered at .6988, .7027 and .7061.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to .6961.

Bearish Scenario

A sustained move under .6961 will indicate the presence of sellers. Taking out the intraday low at .6937 will indicate the selling pressure is getting stronger. This could trigger a further break into the major Fibonacci level at .6924.

We could see a technical bounce on the first test of .6924, but if it fails, look out to the downside. Don’t be surprised by an acceleration to the downside with the August 20 main bottom at .6806 the next likely target.

Bullish Scenario

A sustained move over .6961 will signal the presence of counter-trend buyers. If this creates enough upside momentum then look for the rally to possibly extend into the Fibonacci level at .6988. Since the main trend is down, sellers could come in on the first test of this level.

Taking out .6988 will indicate the short-covering rally is getting stronger. This could trigger a move into the next 50% level at .7027.