NZD/USD Forex Technical Analysis – Ripe for Pullback into .7000 then .6957
The New Zealand Dollar is easing off its multi-year high on Friday as the latest surge through former major chart resistance left it looking a little stretched on the upside, indicating we may need to see a break to alleviate some of the upside pressure.
The Kiwi has been on a tear recently as the prospect of a vaccine-fueled global recovery next year boosted demand for higher risk currencies and toppled the safe-haven U.S. Dollar. The currency has also been backed by comments from the Reserve Bank of New Zealand (RBNZ) that suggested it may not have push its Official Cash Rate (OCR) into negative territory early next year as previously thought.
At 09:14 GMT, the NZD/USD is trading .7043, down 0.0033 or -0.47%.
The daily chart indicates there is plenty of room to the upside before the next major top, but today’s price action suggests the NZD/USD may be setting up for a corrective pullback.
There is nothing in the fundamentals that suggests a major top is forming. Furthermore, a bearish U.S. Non-Farm Payrolls report on Friday could launch another spike to the upside since it would raise the chances of another fiscal stimulus package.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through .7104 will signal a resumption of the uptrend. The main trend will change to down on a move through .6589. This is highly unlikely by there is room for a pullback into minor support areas and retracement levels.
The minor trend is also up. A trade through .6897 will change the minor trend to down. This will shift momentum to the downside. Today’s early weakness has turned .7104 into a new minor top.
The first minor range is .6897 to .7104. Its 50% level at .7000 is the first downside target.
The second minor range is .6811 to .7104. Its 50% level at .6957 is the second downside target.
The main range is .6589 to .7104. Its 50% level at .6846 is the most important support level.
Daily Swing Chart Technical Forecast
The break back under the old top at .7061 is a sign of weakness. It also suggests the rally to .7104 may have been fueled by buy stops rather than aggressive buying.
A sustained move over .7104 will indicate the buying is betting stronger. This could generate the upside momentum needed to lead to an eventual test of the April 13, 2018 main top t .7395.
A sustained move under .7104 will signal the presence of sellers. This could trigger a break into the pivot at .7000. Sellers could come in on the first test of this level, but if it fails then look for the selling to possibly extend into the next pivot at .6957. This is a potential trigger point for an acceleration to the downside.
For a look at all of today’s economic events, check out our economic calendar.