NZD/USD Forex Technical Analysis – Trend Up, but Ripe for Reversal Top on GDP Miss

The New Zealand Dollar is trading higher late in the session on Wednesday after the Federal Reserve promised to keep funneling cash into financial markets further into the future to fight the recession, even as policymakers’ outlook for next year improved following the initial rollout of a coronavirus vaccine.

Essentially this means easy money will continue, keeping the pressure on the U.S. Dollar over the long-run. The short-run outlook is just as bullish for the Kiwi with traders betting on more fiscal stimulus from the U.S. government.

At 21:00 GMT, the NZD/USD is trading .7099, up 0.0010 or +0.14%.

Traders will get the opportunity to react to the latest GDP data from the New Zealand government at 21:45 GMT. The report is expected to show the biggest ever increase in GDP. Most predictions are for an increase of between 13 percent and 14 percent. This will be substantially higher than last quarter’s 12.2 percent decline.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier in the session when buyers overtook the previous main top at .7120. The breakout was 0.0001, which shows investors weren’t willing to chase the market higher at current price levels ahead of the report.

A trade through .7121 will signal a resumption of the uptrend. The main trend changes to down on a move through .7054.

The new minor range is .7006 to .7121. Its 50% level at .7063 is new support.

The second minor range is .6897 to .7121. Its 50% level at .7008 is additional support.

The third minor range at .6811 to .7221 creates a possible third support level at .6955.

Daily Swing Chart Technical Analysis

The direction of the NZD/USD on Thursday is likely to be determined by trader reaction to .7121.

Bullish Scenario

A sustained move over .7121 will indicate the presence of buyers. This could trigger an acceleration to the upside.

Bearish Scenario

The inability to overcome .7121 will signal the presence of sellers. Taking out the 50% level at .7063 and the main bottom to .7054 will indicate the selling pressure is getting stronger. This could trigger a break into the support cluster at .7008 to .7006.

Potential Closing Price Reversal Top

Taking out .7120 then closing lower for the session on Thursday will form a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction, or even a change in trend if the selling is strong enough to take out .7006.