NZD/USD Forex Technical Analysis – Trend Down But Ripe for Closing Price Reversal Bottom
The New Zealand Dollar weakened against the U.S. Dollar for most of the session on Friday, before end of the week profit-taking and end of the month position-squaring fueled a late session recovery of most of the earlier loss. Despite the intraday rebound rally, the Kiwi still finished lower for the day.
On Friday, the NZD/USD settled at .6310, down 0.0002 or -0.04%.
The NZD/USD continued to be pressured by a dismal outlook for the economy after an ANZ Business Confidence survey released earlier in the week showed companies on edge about the future strength of the economy.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The NZD/USD began its acceleration to the downside last week when the January 20, 2016 main bottom at .6346 was taken out. This old bottom is new resistance.
The NZD/USD isn’t close to changing its trend to up, but due to the prolonged move down in terms of price and time, traders should start watching for a closing price reversal bottom. Short-sellers should watch because the chart pattern can help them determine when to book profits or lighten up on the short-side. Aggressive counter-trend buyers should look for this chart pattern because it could trigger a strong short-covering rally.
The nearest minor top is .6588. The nearest main top is .6791.
If .6588 to .6283 becomes a new minor range then its 50% level or pivot at .6436 will become the next upside target. If .6791 to .6283 becomes the main bottom then its retracement zone at .6587 to .6635 will become the primary upside target.
Daily Swing Chart Technical Forecast
Based on Friday’s price action, the direction of the NZD/USD on Monday is likely to be determined by trader reaction to Friday’s low at .6283.
A sustained move under .6283 will indicate the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into the August 24, 2015 main bottom at .6207.
A sustained move over .6283 will signal the return of buyers. Taking out .6321 will make .6283 a new minor bottom. This could create the upside momentum needed to challenge .6346.
Closing Price Reversal Bottom Scenario
Taking out .6283 then turning higher for the session will put the NZD/USD in a position to post a closing price reversal bottom. This chart pattern won’t change the trend, but it could shift momentum to the upside and this could lead to the start of a counter-trend rally.