NZD/USD Forex Technical Analysis – Trader Reaction to .7204 Sets the Tone

The New Zealand Dollar is trading lower early Monday amid disappointing economic data from China and weak domestic data. Chinese retail sales missed expectations though industrial output stayed solid. Additionally, New Zealand Visitor Arrivals fell 12.4% versus the previously reported 2.8% drop.

At 05:22 GMT, the NZD/USD is trading .7219, down 0.0030 or -0.42%.

The U.S. data calendar is light this week, putting the focus on minutes of the Federal Reserve’s last policy meeting for any clue when officials there might start to talk about tapering.

Last week, the Kiwi lost ground as a surge in U.S. consumer inflation gave Treasury yields a boost, weighing on demand for dollar-denominated assets and consequently, dollar-linked currencies like the Australian and New Zealand Dollars.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of a closing price reversal top on May 10.

A trade through .7305 will negate the closing price reversal top and signal a resumption of the uptrend. A move through .7115 will change the main trend to down.

The minor trend is also up. A trade through .7135 will change the minor trend to down. A move through .7255 will make .7135 a new main bottom.

The main range is .7465 to .6943. Its retracement zone at .7204 to .7266 is resistance. The NZD/USD is currently trading inside this zone.

The short-term range is .6943 to .7305. Its retracement zone at .7124 to .7081 is potential support.

Daily Swing Chart Technical Forecast

The early inside move indicates investor indecision and impending volatility. The Forex pair is also trading inside the main retracement zone. Therefore, the direction of the NZD/USD on Monday is likely to be determined by trader reaction to the main 50% level at .7204 and the 61.8% level at .7266.

Bearish Scenario

A sustained move under .7204 will indicate the presence of sellers. Taking out this level could create the downside momentum needed to challenge the minor bottom at .7135, followed by the short-term 50% level at .7124 and the main bottom at .7115.

Bullish Scenario

A sustained move over .7204 will signal the presence of buyers. If this move creates enough upside momentum then look for a drive into the main Fibonacci level at .7266. This could trigger an acceleration into the main top at .7305.