NZD/USD Forex Technical Analysis – Sustained Breakout Over .7027 Could Fuel Rally into .7089 – .7093

The New Zealand Dollar is trading higher on Tuesday, testing its highest level since August 16. The rally is being supported by lower Treasury yields and a weaker U.S. Dollar. Traders are also shrugging off mixed domestic economic data.

At 04:06 GMT, the NZD/USD is trading .7033, up 0.0034 or +0.48%.

U.S. Treasury yields are moving slightly lower early Tuesday as investors look ahead to Friday’s all-important jobs report. This report will be watched closely since it will play a major part in determining when and how the Federal Reserve will start unwinding its bond program. Economists polled by Dow Jones expect 750,000 jobs were created in August and the unemployment rate fell to 5.2%.

In economic news, annual New Zealand housing consents have hit an all-time high, eclipsing figures that date back to a year before World War II broke out. Meanwhile, New Zealand business sentiment fell in August, with many activity indicators including loan activity and investment intentions, easing even before a COVID-19 lockdown was enforced across the country, an ANZ Bank survey showed on Tuesday.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through .7089 will change the main trend to up.

A move through .6806 will signal a resumption of the downtrend. This is highly unlikely, but the seven day rally has put the NZD/USD inside the window of time for a potentially bearish closing price reversal top.

The NZD/USD is currently trading on the strong side of a retracement zone at .7027 to .6924, making it support.

On the upside, the next potential target is a retracement zone at .7093 to .7146.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Tuesday will be determined by trader reaction to .6999.

Bullish Scenario

A sustained move over .6999 will indicate the presence of buyers. Crossing to the bullish side of the 50% level at .7027 will indicate the buying is getting stronger. If this move generates enough upside momentum then look for the rally to possibly extend into the minor top at .7062, followed by the main top at .7089.

Taking out .7089 will change the main trend to up, which should lead to a test of the retracement zone at .7093 to .7146.

Bearish Scenario

A sustained move under .6999 will signal the presence of sellers. If this move creates enough downside momentum, we could see a steep break into .6924.

Side Notes

A close under .6999 will form a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.