NZD/USD Forex Technical Analysis – Trader Reaction to .6891 Pivot Sets the Tone on Friday

The New Zealand Dollar is inching lower early Friday after failing to follow-through to the upside following yesterday’s strong performance. The early price action supports the notion that Thursday’s rally was likely fueled by short-covering or end-of-the-month position-squaring rather than aggressive buying.

At 05:05 GMT, the NZD/USD is trading .6890, down 0.0008 or -0.12%.

A rise in U.S. Weekly Initial Jobless Claims on Thursday helped drive the NZD/USD higher. Later today, traders will get the opportunity to react to two major U.S. releases: Core PCE Price Index and ISM Manufacturing PMI. Both are capable of triggering a volatile response by traders.

Core PCE Price Index will be released at 12:30 GMT. It is expected to show inflation rose 0.2% last month. The ISM Manufacturing PMI report, due out at 14:00, is expected to come in at 59.6, slightly below the previously reported 59.9.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6860 will signal a resumption of the downtrend. A move through .7157 changes the main trend to up.

The minor trend is also down. A trade through .7093 will change the minor trend to up. This will also shift momentum to the upside.

The nearest resistance is a major Fibonacci level at .6924. This is followed by a short-term 50% level at .6988.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Friday is likely to be determined by trader reaction to .6891.

Bearish Scenario

A sustained move under .6891 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly lead to a retest of .6860.

Taking out .6860 could trigger an acceleration into the August 20 main bottom at .6806.

Bullish Scenario

A sustained move over .6891 will signal the presence of buyers. If this move generates enough upside momentum then look for a surge into .6924, followed by .6947.