NZD/USD Forex Technical Analysis – Testing Major Support Zone at .7039 – .6997
The New Zealand Dollar finished higher on Friday, reversing earlier weakness that had the Forex pair testing its lowest level since October 14. Profit-taking after three straight lower closes may have contributed to the turnaround, but the biggest influence was a plunge in U.S. consumer sentiment.
On Friday, the NZD/USD settled at .7041, up 0.0020 or +0.28%.
The Kiwi Dollar fell against the greenback after the hottest U.S. inflation reading in 30 years encouraged investors to bet on a sooner-than-expected rate hike by the Federal Reserve. The Forex pair turned around on Friday, however, following a government report that showed a sharp drop in sentiment. The University of Michigan said its preliminary index dropped to 66.8 this month, a 6.8 percent decline.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of a closing price reversal top on October 21.
A trade through .6860 will change the main trend to down. A move through .7219 will negate the closing price reversal top and signal a resumption of the uptrend.
The minor trend is also down. This confirms the shift in momentum. A trade through .7177 will change the minor trend to up.
The NZD/USD also formed a closing price reversal bottom on Friday. A trade through .7048 will confirm the potentially bullish chart pattern. A trade through .6997 will negate the chart pattern and signal a resumption of the downtrend.
The main range is .6860 to .7219. Its retracement zone at .7040 to .6997 is support. This zone stopped the selling on Friday.
The minor range is .7177 to .6997. Its 50% level at .7087 is the nearest resistance.
The short-term range is .7219 to .6997. Its 50% level at .7108 is the primary upside target and resistance.
Since the main trend is down, look for sellers on a test of .7087 – .7108.
Daily Swing Chart Technical Forecast
The direction of the NZD/USD early Monday is likely to be determined by trader reaction to .7040.
Bullish Scenario
A sustained move over .7040 will indicate the presence of buyers. If this move creates enough upside momentum then look for sellers on the first test of .7087 to .7108.
Taking out .7108 could trigger an acceleration to the upside with .7177 the next potential upside target.
Bearish Scenario
A sustained move under .7040 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly lead to a retest of the support cluster at .6997.
The key level to watch is .6997. Not only is this major support, but it’s also the trigger point for an acceleration to the downside with .6860 to .6806 the next likely downside target area.
