NZD/USD Forex Technical Analysis – Trade Deal Momentum Could Trigger Breakout Over .6864

Commodity-linked currencies like the New Zealand Dollar have been a tear since the start of the new year. The rally has been driven by the weaker U.S. Dollar and increased demand for risky assets. The catalysts behind those two events has been the dovish U.S. Federal Reserve and hope that the U.S. and China will soon reach an agreement to end the trade dispute.

Last week, the NZD/USD settled at .6834, up 0.0098 or +1.45%.

Weekly Swing Chart Technical Analysis

The main trend is up according to the weekly swing chart. The main trend will change to up on a trade through .6970. A move through .6591 will signal the resumption of the downtrend.

The longer-term trading range is .4892 to .8835. For several months, the NZD/USD has been trading inside its retracement zone at .6864 to .6398. Last week, the Forex pair closed in a position to take out the top end of this zone.

The main range is .7061 to .6424. The Forex pair closed above its retracement zone at .6818 to .6742. This is helping to generate some upside momentum. Consider these levels support this week.

The short-term range is .6424 to .6970. Its retracement zone at .6697 to .6633 is additional support.

Weekly Swing Chart Technical Forecast

Based on last week’s price action and the close at .6834, the direction of the NZD/USD this week is likely to be determined by trader reaction to the main Fibonacci level at .6818.

Bullish Scenario

A sustained move over .6818 will indicate the presence of buyers. If this generates enough upside momentum then look for a drive into the longer-term 50% level at .6864. Look for sellers on the first test of this level, but watch for an acceleration to the upside if this price is taken out.

The 50% level at .6864 is a potential trigger point for a surge over the near-term into the main top at .6970.

Bearish Scenario

The inability to hold above .6818 will signal the presence of sellers. If this move creates enough downside momentum then look for a potential break into the main 50% level at .6742. This is followed closely by the short-term 50% level at .6697.

The NZD/USD is been impressive so far this year. However, keep in mind that New Zealand still has some problems with its economy so sellers may start to come in as the Forex pair approaches the previous top. Furthermore, the impact of the dovish Fed may start to wear off because the news is getting stale. This leaves the potential US-China deal to drive the price action. This could continue to underpin the Forex pair because higher-level talks are scheduled for later this month.