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James Hyerczyk

The New Zealand Dollar is trading lower on Wednesday after giving up earlier gains. The price action is being driven by volatility in the U.S. Treasury markets. Kiwi traders are tuned into the movement of Treasury yields after topping out last week following a more than two month rally.

Despite a drop in Treasury yields since early Tuesday, today’s price action in the Kiwi suggest investors are assessing whether rates will resume their uptrend or if the move is over. This is important because the direction of yields will drive demand for the U.S. Dollar. If yields continue to rise then investors will continue to abandon short dollar positions, putting downward pressure on the New Zealand Dollar.

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At 08:47 GMT, the NZD/USD is trading .7202, down 0.0027 or -0.37%.

To recap, the U.S. bond market sell-off that has driven U.S. yields sharply higher this year and stalled the U.S. Dollar’s decline was triggered by Democrats winning control of U.S. Congress at elections in Georgia last week.

Benchmark 10-year Treasury yields fell more than 6 basis points from a 10-month high hit on Tuesday and the turnaround snuffed out a three-day streak for the dollar.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Monday. A more through .7147 will signal a resumption of the downtrend. The main trend will change to up on a trade through .7316.

The minor range is .7316 to .7147. Its 50% level at .7232 is resistance. It stopped the rally earlier in the session at .7340.

The short-term range is .7003 to .7316. Its 50% level at .7159 is support. This level essentially stopped the selling on Monday at .7147.

The main range is .6589 to .7316. Now that the main trend has changed to down, we can call its retracement zone at .6952 to .6867, the primary downside target.


Daily Swing Chart Technical Forecast

The early price action indicates the direction of the NZD/USD on Wednesday will be determined by trader reaction to .7232.

Bearish Scenario

A sustained move under .7232 will indicate the presence of sellers. The first downside target is .7159. Taking out this week’s low at .7147 could trigger an acceleration to the downside with the next major target coming in at .7003, followed by .6952.

Bullish Scenario

A sustained move over .7232 will signal the presence of buyers. This is a potential trigger point for an acceleration to the upside with the next major target coming in at .7316. Overtaking this level will put the NZD/USD on track for a test of the April 13, 2018 main top at .7395.

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