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James Hyerczyk
New Zealand Dollar (NZD/USD)

The New Zealand Dollar finished higher against the U.S. Dollar on Friday, helping to produce a solid gain for the week. The rally was fueled by expectations of an interest rate cut by the U.S. Federal Reserve at the end of July, but traders were well aware of domestic inflation data scheduled for July 16.

Remarks by Fed chief Jerome Powell last week coupled with the minutes from the Fed’s June meeting pressured the greenback last week as traders priced in a 25-basis point rate cut. The chances of a 50-basis point rate cut, however, dropped from 30% to 20% after the U.S. government reported stronger-than-expected consumer inflation data.

On Friday, the NZD/USD settled at .6695, up 0.0032 or +0.48%.


Daily Technical Analysis

The main trend is down according to the daily swing chart, however, momentum shifted to the upside on July 10 with the formation of a closing price reversal bottom at .6583.

The main trend will change to up on a trade through .6720. This is followed closely by the next main top at .6727. Taking out this level could lead to an eventual rally into the April 15 top at .6784.

A trade through .6583 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The short-term range is .6727 to .6583. Its retracement zone at .6672 to .6655 is support. Closing above this zone is helping to generate an upside bias.

The intermediate range is .6487 to .6727. Its retracement zone at .6607 to .6579 is support. This zone stopped the selling last week at .6583.

The main upside target and resistance is the retracement zone at .6710 to .6764. This zone stopped the rally on July 1 at .6727 and on July 4 at .6720.


Daily Technical Forecast

Based on Friday’s close at .6695, the direction of the NZD/USD on Monday is likely to be determined by trader reaction to the downtrending Gann angle at .6702 and the uptrending Gann angle at .6703.

Bullish Scenario

A sustained move over .6703 will indicate the presence of buyers. If this generates enough upside momentum then look for a breakout over the main 50% level at .6710. This should lead to a test of the two main tops at .6720 and .6727. Taking out these tops will change the main trend to up. This could trigger an acceleration to the upside with the next target the main Fibonacci level at .6746.

Bearish Scenario

A sustained move under .6702 will signal the return of sellers. Crossing under the downtrending Gann angle at .6677 will indicate the selling is getting stronger. This should lead to a test of the short-term retracement zone at .6672 to .6655.

The short-term 50% level at .6655 could trigger an acceleration to the downside with the next target angle coming in at .6643.

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