NZD/USD Forex Technical Analysis – Surprise RBNZ Rate Decision Triggers Huge Short-Covering Rally

Based on the early price action in reaction to the RBNZ decision, the direction of the NZD/USD the rest of the session on Wednesday is likely to be determined by trader reaction to the intermediate 50% level at .6396.
James Hyerczyk
New Zealand Dollar

The New Zealand Dollar is trading sharply higher early Wednesday after the Reserve Bank (RBNZ) Monetary Policy Committee decided to keep the Official Cash Rate (OCR) at 1.0 percent. Policymakers said that employment remains around its maximum sustainable level while inflation remains below the 2 percent target mid-point but within our target range. Additionally, economic developments do not warrant a change to the already stimulatory monetary setting at this time.

Furthermore, economic growth continued to slow in mid-2019 reflecting weak business investment and soft household spending. We expect economic growth to remain subdued over the remainder of the calendar year. We will continue to monitor economic developments and remain prepared to act as required.

At 01:12 GMT, the NZD/USD is trading .6412, up 0.0083 or 1.31%.

The early strength represents short-covering as many traders were caught on the wrong side of the RBNZ decision. Traders appeared to be betting heavily on a rate cut despite indications from the forward interest rate markets that the odds of such a move are substantially less, about 64% at the start of the week.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6466 will change the main trend to up. A move through .6322 will signal a resumption of the downtrend.

The short-term range is .6204 to .6466. Its retracement zone at .6335 to .6304 provided support the last four days, stopping the selling at .6322 on November 8.

The intermediate range is .6588 to .6204. Its retracement zone at .6396 to .6441 is the first target zone. It is currently being tested. Buyers are going to have to overcome the upper or Fibonacci level of this zone at .6441 in order to take a shot at the main top at .6466.

The main range is .6791 to .6204. A change in trend to up on a move through .6466 is likely to lead to a test of its retracement zone at .6498 to .6567. Trader reaction to this zone will determine the longer-term direction of the NZD/USD.

Daily Swing Chart Technical Forecast

Based on the early price action in reaction to the RBNZ decision, the direction of the NZD/USD the rest of the session on Wednesday is likely to be determined by trader reaction to the intermediate 50% level at .6396.

Bullish Scenario

A sustained move over .6396 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the intermediate Fibonacci level at .6441, followed by the main top at .6466.

Bearish Scenario

A sustained move under .6396 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the short-term 50% level at .6335.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.