NZD/USD Forex Technical Analysis – Short-covering Rally Target is .5959 to .6074

The New Zealand Dollar is trading higher early Friday after the Reserve Bank of New Zealand (RBNZ) took steps to shore-up New Zealand’s financial markets, on top of Monday’s Official Cash Rate (OCR) cut, as the coronavirus crisis escalates. Bank economists anticipate RBNZ’s next move will be buying Government bonds, or QE.

At 04:28 GMT, the NZD/USD is trading .5741, up 0.0073 or +1.29%.

New Zealand banks bid for just $200 million of the $2 billion on offer Friday at the Reserve Bank’s first auction to support banking system liquidity as the coronavirus crisis continues battering financial markets.

The RBNZ offered $2 billion worth of three and six month loans to banks after announcing the Term Auction Facility (TAF) alongside other measures earlier on Friday. The Reserve Bank will lend to banks for up to 12 months, taking Government bonds, residential mortgage-backed securities, and other bonds as collateral.

The other steps the Reserve Bank announced on Friday morning include it providing liquidity to the New Zealand government bond market to support the market functioning.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through .5469 will signal a resumption of the downtrend. The main trend will change to up on a move through .6448. This is highly unlikely, but there is room for a normal 50% to 61.8% retracement of the recent sell-off.

The short-term range is .6448 to .5469. Its retracement zone at .5959 to .6074 is the primary upside target. Since the main trend is down, sellers are likely to come in on a test of this area.

Daily Technical Forecast

Based on the early price action and the current price at .5741, the direction of the NZD/USD the rest of the session on Friday is likely to be determined by trader reaction to the steep downtrending Gann angle at .5728.

Bullish Scenario

A sustained move over .5728 will indicate the presence of buyers. If this move creates enough upside momentum then look for the buying to possibly extend into the short-term 50% level at .5959, followed by a potential resistance cluster at .6074 to .6088.

Bearish Scenario

A sustained move under .5728 will signal the presence of sellers. The first minor target level is .5638. This is followed by this week’s low at .5469.

The daily chart shows that .5469 is a potential trigger point for an acceleration to the downside with the next major target the March 4, 2009 main bottom at .4892.