NZD/USD Forex Technical Analysis – Traders Adjusting Short-Positions to Rising Fed Rate Cut Expectations

The New Zealand Dollar is edging lower against the U.S. Dollar on Thursday after posting a short-covering rally the previous session. Although investors are looking for another rate cut by the Reserve Bank of New Zealand in November, which is potentially bearish, they are being forced to make adjustments to their positions because the odds of a Federal Reserve rate cut at the end of October have increased.

At 03:46 GMT, the NZD/USD is trading .6261, down 0.0010 or -0.15%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6204 will signal a resumption of the downtrend. A move through .6349 will change the main trend to up.

The short-term range is .6349 to .6204. Its 50% level or pivot at .6277 is near-term resistance.

The main range is .6451 to .6204. Its retracement zone at .6328 to .6357 is the next upside target and potential resistance area.

Daily Technical Forecast

Based on the early price action and the current price at .6261, the direction of the NZD/USD on Thursday is likely to be determined by trader reaction to the short-term pivot at .6277.

Bearish Scenario

A sustained move under .6277 will indicate the presence of sellers. Crossing to the weak side of the downtrending Gann angle at .6251 will indicate the selling pressure is increasing. This could trigger a break into the four-year low at .6204.

Bullish Scenario

A sustained move over .6277 will signal the presence of buyers. This could trigger a surge into the downtrending Gann angle at .6301.

Since the main trend is down, look for sellers on the first test of .6301. Overtaking .6301 could trigger an acceleration into the 50% level at .6328.

Taking out .6328 could trigger a further rally into .6349, followed closely by the Fibonacci level at .6357.

Side Notes

The New Zealand Dollar isn’t strengthening per see, the U.S. Dollar is getting weaker. For about a month, traders were betting the Fed would pass on an October rate cut. This strengthened the greenback. Conditions have changed this week and a rate cut is now in play. The moves we’re looking at this week are traders making position adjustments to this news.