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James Hyerczyk

After consolidating around the same high for four trading sessions, the New Zealand Dollar surged to its highest level since March 11 on Monday. The four highs suggested topping action especially since the Kiwi closed lower two of the last three days, but the currency was well bid, forcing speculative shorts to cover aggressively.

On Monday, the NZD/USD settled at .6297, up 0.0129 or +1.94%.

The NZD/USD likely rose on demand for riskier currencies as investors looked to positive signs from China’s post-coronavirus economic recovery and hopes for an easing in Sino-U.S. tensions.

Investors were relieved that U.S. President Trump made no move to impose new tariffs on China during a news conference on Friday where he outlined his response to Beijing’s tightening grip over Hong Kong, Reuters said.

They were also helped by the Caixin/Markit Purchasing Managers Index showing a marginal but unexpected improvement in Chinese factory activity last month.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6299 will signal a resumption of the uptrend. The main trend is safe for now, but the NZD/USD is vulnerable to a potentially bearish closing price reversal top. This chart pattern won’t change the trend to down, but it could lead to a 2 to 3 counter-trend break. The main trend will change to down on a move through the nearest swing bottom at .5921.

The main range is .6448 to .5469. Its retracement zone at .6074 to .5958 is controlling the longer-term direction of the NZD/USD. This zone is also major support.


Daily Swing Chart Technical Forecast

Tuesday will be the 12th day up from the last main bottom. This puts the NZD/USD inside the window of time for a closing price reversal top. This makes Monday’s close at .6297 the key level to watch on Tuesday.

Bullish Scenario

A sustained move over .6297 will indicate the presence of buyers. Taking out yesterday’s high at .6299 will indicate the buying is getting stronger. If this move can generate enough upside momentum then we should see an eventual test of the March 9 main top at .6448.

Bearish Scenario

A sustained move under .6297 will signal the presence of sellers. This could trigger a pullback into a series of lows at .6186 to .6149.

Closing Price Reversal Top Formation

Taking out .6299 then turning lower for the session will put the NZD/USD in a position to form a potentially bearish closing price reversal top.

Closing below .6299 will form the chart pattern. If confirmed then look for a possible two to three day correction.

For a look at all of today’s economic events, check out our economic calendar.

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