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James Hyerczyk

The New Zealand Dollar finished lower on Thursday following a volatile two-sided trading session. ECB policy decisions and comments from a high ranking central bank official as well as demand for risky assets drove the currency higher early in the session. However, the Kiwi turned lower later in the session as U.S. equity markets moved into negative territory, increasing the U.S. Dollar’s appeal as a safe-haven asset.

At 20:57 GMT, the NZD/USD is trading .6650, down 0.0035 or -0.52%. This is down from a high of .6709.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6789 will signal a resumption of the uptrend following a five day setback. The main trend will change to down on a move through .6489.

The minor trend is also up. A trade through .6601 will change the minor trend to down. This will also shift momentum to the downside.

The short-term range is .6489 to .6789. Its retracement zone at .6639 to .6604 is support. This zone stopped the selling at .6601 on Wednesday.

The minor range is .6789 to .6601. Its retracement zone at .6695 to .6717 is resistance. This zone stopped the buying at .6709 on Thursday.


Short-Term Outlook

Thursday’s price action solidified the relationship between the higher-yielding New Zealand Dollar and the stock market. The two risky assets are moving nearly lock-step with each other.

Based on Thursday’s price action, the direction of the NZD/USD on Friday is likely to be determined by trader reaction to the short-term 50% level at .6639.

Bearish Scenario

A sustained move under .6639 will indicate the presence of sellers. If this move creates enough downside momentum then look for a break into the short-term Fibonacci level at .6604, followed by the minor bottom at .6601.

The daily chart shows there is plenty of room to the downside with .6489 the next major target. Basically, .6601 is a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over .6639 will signal the presence of buyers. This will also signal a successful defense of the .6639 to .6604 retracement zone as well as the minor bottom at .6601.

If this move is able to generate enough upside momentum then look for the rally to possibly extend into the minor retracement zone at .6695 to .6717.

Side Notes

Watch the NZD/USD chart for support and resistance, but you may want to use the movement in the S&P 500 Index as your trigger. Think set-up on the NZD/USD chart and trigger on the S&P 500 Index chart.

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