NZD/USD Forex Technical Analysis – Sustained Move under .5804 Puts .5469 on Radar

The New Zealand Dollar is edging lower against its U.S. counterpart on Friday as it continues to struggle to gain traction despite expectations of another interest rate hike by the Reserve Bank (RBNZ) next month.

One problem is the hawkish U.S. Federal Reserve’s monetary policy. Even after last Wednesday’s super-sized 75 basis point rate hike, policymakers vowed to remain aggressive until inflation is under control.

Meanwhile the RBNZ is expected to boost its Official Cash Rate (OCR) by “only” 50 basis points at its October policy meeting. A smaller rate hike by RBNZ than the U.S. Federal Reserve will further tighten the interest rate differential between government bonds, making the greenback a more desirable currency than the Kiwi.

At 05:30 GMT, the NZD/USD is trading .5834, down 0.0011 or -0.19%.

Other factors putting pressure on the NZD/USD are geopolitical tensions, a drop in investor sentiment and falling commodity prices.

Additionally, while inflation is also a concern for New Zealand’s central bank, Deputy Reserve Bank Governor Christian Hawkesby said they have “growing confidence” that inflation will be significantly lower than it is at the moment” over 12 to 18 months.

Westpac senior economist Satish Ranchhod also sees inflation easing, however, at a slow pace. Inflation is “probably going to ease back over the coming months”, but the weaker New Zealand Dollar means “that decline is going to be much more gradual”.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .5804 will signal a resumption of the downtrend. A move through .6162 will change the main trend to up.

The minor trend is also down. A trade through .6002 will change the minor trend to up. This will also shift momentum to the upside.

The nearest resistance is a pivot at .5915, followed by a second pivot at .5983.

Daily Swing Chart Technical Forecast

Trader reaction to .5846 is likely to determine the direction of the NZD/USD on Friday.

Bearish Scenario

A sustained move under .5846 will indicate the presence of sellers. This could trigger a break into the 2-1/2 year low at .5804. Taking out this level could trigger a resumption of the move into the March 19, 2020 main bottom at .5469.

Bullish Scenario

A sustained move over .5846 will signal the presence of counter-trend buyers. If this creates enough upside momentum then look for a labored rally into the first pivot at .5915, followed by the second pivot at .5983.