NZD/USD Forex Technical Analysis – Sustained Move Under .6354 Puts .6231 on Radar

The New Zealand Dollar plunged against the U.S. Dollar on Friday after government data showing a bigger than expected increase in consumer price inflation drove U.S. Treasury yields higher, making the greenback a more attractive asset.

Data released by the U.S. Labor Department showed consumer prices in the country shot up by more than expected in the month of May, raising the prospects of aggressive policy tightening by the Federal Reserve.

On Friday, the NZD/USD settled at .6353, down 0.0029 or -0.45%.

US Economic Data Underpins U.S. Dollar

According to the U.S. Labor Department, the consumer price index rose 1.0% in May after rising by 0.3% in April. Economists had expected consumer prices to increase by 0.7%.

The annual rate of consumer price growth accelerated to 8.6% in May from 8.3% in April. The annual rate of core consumer price growth slowed to 6% in May from 6.2%. Economists had expected the pace of growth to decelerate to 5.9%.

Additionally, a report released by the University of Michigan on Friday showed consumer sentiment in the U.S. has tumbled to its lowest level on record in the month of June.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6576 will change the main trend to up.

The short-term range is .6217 to .6576. On Friday, the NZD/USD closed slightly below its retracement zone at .6397 to .6354, making it resistance.

The next downside target is the long-term Fibonacci level at .6231. On the upside, the nearest resistance is a long-term 50% level at .6467.

Daily Swing Chart Technical Forecast

Trader reaction to .6354 is likely to determine the direction of the NZD/USD early Monday.

Bearish Scenario

A sustained move under .6354 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the minor bottom at .6291, followed by the support cluster at .6231 to .6217.

Bullish Scenario

A sustained move over .6354 will signal the presence of buyers. This could lead to a labored short-covering rally with 50% levels at .6397 and .6467 the first two targets.