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James Hyerczyk

The New Zealand Dollar is struggling to gain traction early Tuesday as traders continue to react to China’s move to facilitate shorts on the Yuan to tame its rise. The Kiwi is somewhat correlated with the Yuan because of the trade relationship between New Zealand and China.

The Kiwi is also being dragged down by a weaker Australian Dollar, falling in sympathy due to the impact of developments in the Chinese financial system.

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At 05:21 GMT, the NZD/USD is trading .6653, up 0.0006 or +0.08%.

It’s not only the close tie with China and Australia that is contributing to the Kiwi’s losses. Traders are still trying to price in the new developments from the Reserve Bank of New Zealand (RBNZ). Last week, the RBNZ provided additional indications that it is seriously moving towards negative rates, despite later announcing they will taper their bonds purchases for a third straight week.

RBNZ Chief Economist Ha said that the bank would “rather be aggressive with stimulus” and do too much too soon than too little too late.”


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6673 will signal a resumption of the uptrend. The main trend will change to down on a move through .6547. Last week’s change in trend was fueled by a jump in investor sentiment on the hopes of a new U.S. stimulus deal.

The short-term range is .6798 to .6512. Its retracement zone at .6655 to .6689 is providing resistance. It stopped the rally at .6673 on Friday. This zone is also controlling the near-term direction of the NZD/USD.

The minor range is .6547 to .6673. Its 50% level at .6610 is potential support.

The main support zone is .6589 to .6540. This zone stopped the selling at .6547 on October 8.


Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the NZD/USD the rest of the session on Tuesday is likely to be determined by trader reaction to the short-term 50% level at .6655.

Bearish Scenario

A sustained move under .6655 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the minor pivot at .6610.

Bullish Scenario

A sustained move over .6655 will signal the presence of buyers. The first upside target is .6673, followed closely by the Fibonacci level at .6689. This price is a potential trigger point for an acceleration to the upside with the next major target the potential resistance cluster at .6791 to .6798.

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