NZD/USD Forex Technical Analysis – Settled on Bullish Side of .6825 to .6781 Retracement Zone

The New Zealand Dollar reversed earlier weakness on Friday to close sharply higher for the session. The move drove the currency to its highest level against the U.S. Dollar since December 19.

The catalyst behind the bullish outside move was a report that said U.S. Federal Reserve policymakers were nearing a decision on when to end its bond reduction program. This is important to traders because it will signal the central bank is moving closer to ending its tightening cycle. The Kiwi rallied because the news weakened demand for the greenback.

On Friday, the NZD/USD settled at .6841, up 0.0079 or +1.16%.

Earlier in the week, the New Zealand Dollar posted a daily reversal bottom after the release of better than expected consumer inflation data encouraged investors to reduce bets on an interest rate cut by the Reserve Bank of New Zealand.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. Friday’s trade through .6850 reaffirmed the uptrend. If the upside momentum is sustained then the next main top target is .6912. The main trend will change to down on a move through the last swing bottom at .6706.

The minor trend is also up. It will change to down on a move through .6747. If the upside momentum continues then look for the rally to possibly extend into the next minor top at .6880.

The main range is .6970 to .6592. The NZD/USD closed on the strong side of its retracement zone at .6825 to .6781. This zone is new support. Holding above it will help maintain the upside bias.

Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at .6826, the direction of the NZD/USD on Monday is likely to be determined by trader reaction to the main Fibonacci level at .6825.

Bullish Scenario

A sustained move over .6825 will indicate the presence of buyers. Taking out last week’s high at .6851 will indicate the buying is getting stronger. This could create the upside momentum needed to challenge the minor top at .6880. Overcoming this level could lead to a test of the main top at .6912. This is the last resistance before the main top at .6970.

Bearish Scenario

A sustained move under .6825 will signal the return of sellers and indicate that Friday’s move was an overreaction to the news. If the selling is strong enough, the NZD/USD could pull back into the main 50% level at .6781. If this level fails then look for the selling pressure to possibly extend into the minor bottom at .6747.