NZD/USD Forex Technical Analysis – Strengthens Over .6516, Weakens Under .6493

The NZD/USD suffered a sharp loss on Wednesday as investors reacted to weak PMI data from China, concerns over business confidence in New Zealand and solid U.S. private sector jobs data.

The data from China suggests a weakening economy which could spill over to New Zealand, one of its largest trading partners. Another poor showing from a business confidence report has raised questions as to whether the next move by the Reserve Bank of New Zealand (RBNZ) will be an interest rate cut.

In the U.S., the ADP labor report showed the private sector added more jobs than expected in October. Furthermore, another report from the Labor Department showed wages and salaries grew at a rapid pace. This news solidified the odds of a December rate hike from the Fed, while making the U.S. Dollar a more attractive investment.

Basically, the NZD/USD continues to be driven lower by the divergence in monetary policy between the hawkish U.S. Federal Reserve and the dovish RBNZ.

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through .6607 will signal a resumption of the uptrend. A move through .6465 will change the main trend to down with .6424 the next downside target.

The minor trend is down. This changed momentum to the downside. A trade through .6573 will change the minor trend to up and shift momentum back to the upside.

The main range is .6700 to .6424. Its retracement zone at .6562 to .6595 is resistance. This zone is essentially controlling the near-term direction of the NZD/USD.

The short-term range is .6424 to .6607. Its retracement zone at .6515 to .6494 is new support. Crossing to the weak side of this zone will indicate that the selling pressure is getting stronger.

Daily Technical Forecast

Based on Wednesday’s price action, the direction of the NZD/USD on Thursday is likely to be determined by trader reaction to the short-term 50% level at .6515.

A sustained move under .6515 will indicate the presence of sellers. Crossing to the weak side of an uptrending Gann angle at .6514 will indicate the selling is getting stronger. This could trigger a sharp break into the Fib level at .6494. This is another trigger point for an acceleration into an uptrending Gann angle at .6469, followed closely by the main bottom at .6465.

A sustained move over .6515 will indicate the return of buyers. If this move generates enough upside momentum then look for a rally into a downtrending Gann angle at .6555. This is followed closely by the main 50% level at .6562 and the minor top at .6573.