NZD/USD Forex Technical Analysis – Traders May Try to Build Support Base Inside .7040 – .6997 Retracement Zone

The New Zealand Dollar is edging higher against the U.S. Dollar early Wednesday after another successful test of its lowest level since October 14. The currency also recaptured the lower level of the retracement zone that is controlling its near-term direction.

After being punished the previous session by stronger-than-expected U.S. retail sales data and hawkish comments from a Federal Reserve official, the Kiwi is getting a little boost from a report that showed domestic producer inflation continuing to rise.

At 06:55 GMT, the NZD/USD is trading .7008, up 0.0018 or +0.26%.

In economic news, prices charged by companies for the goods and services they produced jumped by 6.2 percent in the year to the end of September, while their input costs rose 7 percent, Stats NZ reported. Stats NZ said the increases in the two “producer price” indices were the largest in more than 12 years.

The jump in the producer price index (PPI) could trouble the Reserve Bank (RBNZ) when it meets next week to consider its next move on interest rates.

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 October 21.

A trade through .7219 will negate the closing price reversal top and signal a resumption of the uptrend. A move through .6860 will change the main trend to down.

The minor trend is down. This confirms the shift in momentum. A trade through .7081 will change the minor trend to up.

The short-term range is .6860 to .7219. The NZD/USD is currently trading inside its retracement zone at .7040 to .6997, making the later potential support. The upper level is still potential resistance.

Minor pivots at .7079 and .7100 are potential resistance targets. Since the main trend is down, sellers could come in on a test of these levels.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to .6997.

Bullish Scenario

A sustained move over .6997 will indicate the presence of counter-trend buyers. This could trigger a surge into .7040.

Look for sellers on the first test of .7040, but overcoming the level will indicate the buying is getting stronger with .7079, .7081 and .7100 the next potential upside targets. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under .6997 will signal the presence of sellers. The first downside target is .6980. This is a potential trigger point for an acceleration to the downside.

The daily chart indicates there is plenty of room to the downside with potential downside targets coming in at .6877 and .6860.