NZD/USD Forex Technical Analysis – Trader Reaction to .6606 – .6626 Determines Near-Term Direction

The New Zealand Dollar inching higher early Wednesday after posting a strong rally the previous session. The rally was fueled by a combination of factors including increased demand for risky assets, a drop in U.S. Treasury yields and a weaker U.S. Dollar. Traders shrugged off expectations of negative interest rates for next year and last week’s dovish moves by the Reserve Bank of New Zealand (RBNZ).

At 03:50 GMT, the NZD/USD is trading .6605, up 0.0004 or +0.07%.

In other news, earlier in the session, New Zealand reported PPI Input at -1.0% and PPI Output at -0.03%. Later today at 18:00 GMT, the Federal Reserve will release the minutes from its late July monetary policy meeting. Traders will be looking for clues as to the timing of future moves by the central bank.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum shifted to the upside with the formation of a closing price reversal bottom on Monday and yesterday’s subsequent confirmation of the potentially bullish chart pattern.

The main trend will change to up on a trade through .6691. A move through .6520 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The short-term range is .6691 to .6520. Its retracement zone at .6606 to .6626 is the primary upside target. This zone is currently being tested.

The minor range is .6627 to .6520. Its 50% level at .6573 is potential support.

The main range is .6381 to .6716. Its 50% level at .6548 is controlling the longer-term direction of the Forex pair.

Daily Swing Chart Technical Forecast

The confirmation of the closing price reversal bottom does not change the trend to up, but it could trigger a 2 to 3 day counter-trend rally. The first objective at .6606 to .6626 has already been met so this is the area to focus on today. Aggressive counter-trend traders could step in to stop the rally, or buyers could overcome this zone and trigger an acceleration to the upside.

Based on the early price action, the direction of the NZD/USD the rest of the session on Wednesday is likely to be determined by trader reaction to .6606.

Bullish Scenario

A sustained move over .6606 will indicate the presence of buyers. This could lead to a quick test of the resistance cluster at .6626 – .6627. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under .6606 will signal the presence of sellers. This could trigger a sharp break into the 50% level at .6573, followed by the main 50% level at .6548.