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NZD/USD Forex Technical Analysis – Short-Covering Momentum Could Lead to Test of .6655

By:
James Hyerczyk
Published: Oct 21, 2020, 08:20 UTC

The early price action suggests the direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to the pivot at .6614.

NZD/USD Forex Technical Analysis – Short-Covering Momentum Could Lead to Test of .6655

The New Zealand Dollar is trading higher on Wednesday after hitting its lowest level since October 8 the previous session. The Kiwi is being supported as optimism over pre-election U.S. fiscal stimulus powered demand for risky assets.

Higher-yielding commodity currencies like the New Zealand Dollar got a boost on news the White House and Democrats have moved closer to agreement on a new coronavirus relief package as President Donald Trump said he was willing to accept a large aid bill.

At 08:01 GMT, the NZD/USD is trading .6620, up 0.0041 or +0.62%.

The rally is likely being fueled by short-covering since traders have been pressing the Kiwi lower lately due to dovish talk from the Reserve Bank of New Zealand (RBNZ), which included a possible move to negative interest rates in early 2021.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum is trending lower. A trade through .6547 will change the main trend to down. A move through .6682 will signal a resumption of the uptrend.

The main support zone is .6589 to .6540. This retracement zone stopped the selling at .6547 on October 8 and at .6553 on October 20.

The minor range is .6547 to .6682. Its 50% level is .6614. This level could act like a pivot today.

The short-term range is .6798 to .6512. Its retracement zone at .6655 to .6689 is the primary upside target and resistance zone. This zone stopped the buying at .6682 on October 14.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to the pivot at .6614.

Bullish Scenario

A sustained move over .6614 will indicate the presence of buyers. If this creates enough upside momentum then look for the buying to possibly extend into the short-term 50% level at .6655. Counter-trend sellers could come in on the first test of this level. Overtaking it could trigger a further rally into .6682 to .6689.

Bearish Scenario

A sustained move under .6614 will signal the presence of sellers. This could trigger a break into the 50% level at .6589. Since the main trend is up, buyers could step in on a test of this level. If it fails then the selling could possibly extend into a cluster of levels at .6553, .6547 and .6540.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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