NZD/USD Forex Technical Analysis – Recession Concerns Put .6025 – .5904 on Radar

The New Zealand Dollar plunged to its lowest level since Nov. 23 on Friday after data showed U.S. inflation accelerated while consumer spending rebounded last month, reinforcing expectations that the Federal Reserve may need to hike interest rates a few more times this year to curb the surge in prices.

The personal consumption expenditures (PCE) price index, tracked by the Fed for monetary policy rose 0.6% last month after gaining 0.2% in December. In the 12 months through January, the PCE price index accelerated 5.4% after rising 5.3% in December.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity jumped 1.8% last month, according to the Commerce Department.

On Friday, the NZD/USD settled at .6165, down 0.0063 or -1.02%.

Additional Pressure from Devastating Natural Disasters, Recession Forecast

Adding to the currency’s weakness were worries over how the country was going to pay for the devastating floods that damaged infrastructure and farmland earlier in the month. Additionally, last week, Reserve Bank of New Zealand (RBNZ) Governor Orr forecast a recession for later this year.

This could encourage the RBNZ to slowdown the size of its interest rate hikes.

New Zealand Retail Sales Disappoint

Economic news released earlier today showed quarterly retail sales dropped 0.6%, missing the +0.2% forecast. Core retail sales fell by 1.3%. Traders were looking for a reading of +0.3%.

The report could be a sign that the recession has already started.

Daily NZD/USD Technical Analysis

The main trend is down according to the daily swing chart. A trade through the next main bottom at .6156 will reaffirm the downtrend. A move through .6389 will change the main trend to up.

The long-term range is .5496 to .7465. The NZD/USD closed on the weak side of its retracement zone at .6231 to .6467, making it resistance.

The main range is .5512 to .6538. Its retracement zone at .6025 to .5904 is the primary downside target.

Daily NZD/USD Technical Forecast

Trader reaction to .6165 is likely to determine the direction of the NZD/USD early Monday.

Bearish Scenario

A sustained move under .6165 will indicate the presence of sellers. If this creates enough downside momentum then look for a possible acceleration to the downside with the main 50% level at .6025 the next major downside target.

Bullish Scenario

A sustained move over .6165 will signal the presence of buyers. This could trigger an intraday short-covering rally into the long-term Fibonacci level at .6232.

Side Notes

Taking out .6151 then closing over .6165 will indicate the presence of buyers. If this move creates enough upside momentum then look for the start of a 2 to 3 day counter-trend rally. The first target is .6232. Overtaking this level will indicate the short-covering is getting stronger.