NZD/USD Forex Technical Analysis – Strengthens Over .6773, Weakens Under .6765

The New Zealand Dollar is under pressure early Friday. The move confirmed yesterday’s closing price reversal top which formed after a steep plunge. This could fuel the start of a 2 to 3 day sell-off or even more.

At 0512 GMT, the NZD/USD is trading .6778, down 0.0003 or -0.04%.

Thursday’s hefty losses were fueled by lingering concerns over U.S.-China trade relations which continue to dog both the New Zealand and Australian Dollars. A stronger Greenback also pressured the Kiwi with the U.S. currency benefitting from strong domestic growth figures.

Investors were also rattled by speculation the White House would use its truce on trade with the European Union to focus on its tariff battle with China. Reports are surfacing that say one reason for the deal between the U.S. and the EU was to work together to attack China’s market abuses.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. It turned up on Thursday when buyers took out .6851. The lack of follow-through to the upside, however, suggests that the buying may have been fueled by short-covering and buy stops rather than aggressive new buying. Yesterday’s rally also fell short of the next main top at .6859, which looks more important on the daily chart.

The main trend may be up, but momentum shifted to the downside with the formation of the closing price reversal top at .6851. A trade through this level will negate the chart pattern and signal a resumption of the uptrend. A move through .6713 will change the main trend to down.

The minor trend is also up. It will change to down when sellers take out .6769. This will also reaffirm the shift in momentum to the downside.

The main range is .6922 to .6688. Its retracement zone at .6805 to .6833 is new resistance. This area is also controlling the longer-term direction of the Forex pair.

The nearest support is a 50% level at .6773 and a Fib level at .6765. Crossing to the weak side of these levels will also indicate increasing selling pressure.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the NZD/USD is likely to be determined by trader reaction to the 50% level at .6773.

Holding .6773 will indicate the presence of buyers. If this generates enough upside momentum then look for a possible continuance of the rally into .6805, .6833 and .6851.

A sustained move under .6773 will signal the presence of sellers. This could lead to a quick test of .6769, followed closely by .6765.

Taking out .6769 could trigger an acceleration to the downside with the next target coming in at .6713.