NZD/USD Forex Technical Analysis – Trade Through .7006 Shifts Momentum to Downside

New Zealand Dollars tumbled on Wednesday after giving back earlier gains as demand for riskier assets fell in reaction to a plunge in U.S. equities.  The Kiwi traded higher early in the session on positive updates on the COVID-19 development also with hopes for a fresh fiscal stimulus package. However, those gains were lost as investors grew discouraged over the slow pace of the fiscal stimulus talks in Congress.

At 20:32 GMT, the NZD/USD is trading .7023, down 0.0021 or -0.30%.

U.S. Senate Majority Leader Mitch McConnell said lawmakers were still looking for a path toward an agreement on COVID-19 aid, as the U.S. House of Representatives prepared to vote on a one-week funding bill to provide more time for a deal.

“There is a lot of talk, they say they are making progress and then they say they are so far apart, it is frustrating,” ”aid Tim Ghriskey, Chief Investment Strategist at Inverness Counsel in New York, New York.

“The other thing is we’ve had this meteoric rise without any real pullback so at some point we are going to see a pullback, you need some digestion, certainly,” he added.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, four days of consolidation suggests momentum may be getting ready to shift to the downside.

A trade through .7104 will signal a resumption of the uptrend. The main trend will change to down on a move through the nearest swing bottom at .6589. This is highly unlikely, but there is room for a short-term correction.

The minor trend is also up. A trade through .7006 will change the minor trend to down. This will shift momentum to the downside.

The minor range is .7104 to .7006. Its 50% level at .7055 is potential resistance.

The second minor range is .6897 to .7104. Its 50% level at .7000 is first potential support level.

The third minor range is .6811 to .7104. Its 50% level at .6958 is the second potential support level.

The short-term range is .6589 to .7104. Its 50% level at .6958 is a potential value level.

Short-Term Outlook

The downside momentum created by Wednesday’s reversal to the downside suggests sellers could easily take out the minor bottom at .7006 and the pivot at .7000. This could be enough to drive the NZD/USD into the next pivot at .6958.

The 50% level at .6958 could stop the selling on the first test, but if it’s taken out, we could see an acceleration to the downside with the next major target the 50% value level at .6846.

Holding .7000 will signal the presence of buyers. If this creates enough upside momentum then look for a drive into the minor pivot at .7055. Overcoming this level could trigger a surge into .7094, followed by .7104.