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James Hyerczyk
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NZD/USD

The New Zealand Dollar is trading higher on Thursday after recovering from yesterday’s setback. On Wednesday, the Kiwi was pressured after a selloff in U.S. tech stocks dampened demand for higher-risk currencies.

In the U.S. on Wednesday, a report showed core inflation last month was zero, against market expectations of 0.2%. Additionally, in a speech, Fed Chair Jerome Powell focused on still-high unemployment and re-iterated that the central bank’s new policy framework could accommodate annual inflation above 2% for some time before hiking rates.

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At 07:00 GMT, the NZD/USD is trading .7233, up 0.0023 or +0.32%.

Inflation is a lot different in New Zealand, where the coronavirus is well contained. Surging accommodation prices have inflation running above expectations and investors have scaled back what had been further rate cut expectations.

With the Fed likely to remain accommodative over the long-run, and traders trimming expectations of a RBNZ rate cut, the NZD/USD is expected to be well supported.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7254 will signal a resumption of the uptrend. This is a potential trigger point for an acceleration to the upside. The main trend will change to down on a move through .7136.

The minor trend is also up. .7254 is a new minor top.

The short-term range is .7316 to .7096. The NZD/USD is currently straddling its retracement zone at .7026 to .7232. Trader reaction to this zone could determine the near-term direction.

The main range is .7003 to .7316. Its retracement zone at .7159 to .7122 is key support.

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Daily Swing Chart Technical Forecast

The early price action suggests the direction of the NZD/USD on Thursday is likely to be determined by trader reaction to the short-term Fibonacci level at .7232.

Bullish Scenario

A sustained move over .7232 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the minor top at .7254.

The daily chart indicates there is plenty of room to the upside if buyers can take out .7254 with conviction. This could be the trigger point for an eventual rally into the January 6 main top at .7316.

Bearish Scenario

A sustained move under .7232 will signal the presence of sellers. This could trigger a quick break into the short-term 50% level at .7206.

If this fails then look for the selling to possibly extend into a minor retracement zone at .7195 to .7181.

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