NZD/USD Forex Technical Analysis – Trend Up but Testing Lower End of Major Retracement Zone

The New Zealand Dollar plunged on Wednesday after the Reserve Bank flagged a possible cut in interest rates after signaling in February that its next move on rates could be higher or lower. In making its statement, the RBNZ became the latest major central bank to turn dovish.

The central bank said, “Given the weaker global economic outlook and reduced momentum in domestic spending, the more likely direction of our next OCR move is down.”

On Wednesday, the NZD/USD settled at .6797, down 0.0110 or -1.59%.

Daily Swing Chart Technical Analysis

Despite yesterday’s steep sell-off, the main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on March 21. A trade through .6939 will negate the closing price reversal top and signal a resumption of the uptrend. A trade through .6744 will change the main trend to down.

The minor trend is down. This move supports the shift in momentum to the downside.

The main range is .6970 to .6591. Its retracement zone at .6825 to .6780 is controlling the long-term direction of the NZD/USD. On Wednesday, the NZD/USD closed inside this zone.

The short-term range is .6591 to .6843. Its retracement zone at .6767 to .6725 is the next downside target.

Daily Swing Chart Technical Forecast

Based on the price action and Wednesday’s close at .6797, the direction of the NZD/USD on Thursday is likely to be determined by trader reaction to the main 50% level at .6780.

Bullish Scenario

A sustained move over .6780 will indicate the return of buyers. If this move creates enough upside momentum then look for a rally back into the main Fibonacci level at .6825. Overtaking this level could generate a further rally into a short-term retracement zone at .6860 to .6878.

Bearish Scenario

Taking out .6780 will indicate the selling pressure is getting stronger. This is followed by the short-term retracement zone at .6767 to .6725. Additional downside targets are three main bottoms at .6744, .6719 and .6706. A trade through these levels will change the main trend to down and reaffirm the downtrend.