NZD/USD Forex Technical Analysis – Trader Reaction to .7087 Pivot Sets the Tone

The New Zealand Dollar is edging higher on Monday in response to the news that President Trump had passed the stimulus plan and backed away from a possible government shutdown. Essentially, it is demand for risk that is driving the currency higher. The news is also pushing down the U.S. Dollar which is giving the commodity-linked currency an added boost.

Trading is light because it’s a bank holiday in New Zealand. Otherwise, I think we would’ve seen a stronger rally. We’re also looking at the start of another holiday-shortened week with another bank holiday on Thursday, which means we could see exaggerated price action due to the low volume.

At 07:09 GMT, the NZD/USD is trading .7136, up 0.0013 or +0.18%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on last Monday when sellers took out the previous main bottom at .7054. It was reaffirmed when .7006 failed as support.

The trend indicator may be indicating a change in trend, but the price action suggests the change in trend may have been fueled by sell stops rather than aggressive shorting in reaction to surprise news about a coronavirus variant in the U.S. That news has been downplayed since it was reported.

The main trend will change to up on a trade through .7171. A move through .7003 will signal a resumption of the downtrend.

The minor range is .7171 to .7003. Its 50% level at .7087 is the nearest support.

Daily Swing Chart Technical Forecast

We’re looking for an upside bias on Monday because it’s a risk on day in the global equity markets. However, the Kiwi has to hold .7087 in order to sustain the move.

Bullish Scenario

A sustained move over .7087 will indicate the presence of buyers. If they are able to generate enough upside momentum then look for a test of the multi-year high at .7171. It will probably be difficult to trigger a breakout over this level because of the light volume. If you decide to chase it higher then make sure you have volume on your side or you’ll be whipsawed.

Bearish Scenario

A sustained move under .7087 will signal the presence of sellers. This could trigger a sharp break into .7003 over the near-term. Once again, a successful move needs to be accompanied by strong volume.