NZD/USD Forex Technical Analysis – Trying to Build Support Inside Long-Term Retracement Zone at .7027-.6923

The New Zealand Dollar is edging higher ahead of Tuesday’s U.S consumer price report and Wednesday’s Reserve Bank (RBNZ) interest rate decision and policy statement.

Economists polled by Reuters expect the consumer price index (CPI) to have risen 0.5% from May. Core CPI is expected to have risen 0.4% from May and 4.0% from a year earlier after two straight months of sharp gains in prices.

Any signs that inflation could be more persistent than previously thought could fan expectations the Fed may exit from current stimulus earlier, supporting the dollar against the risky New Zealand Dollar. Conversely, more benign data could lead investors to think the U.S. central bank can afford to maintain an easy policy framework for longer, encouraging more bets on risk-sensitive currencies.

At 05:46 GMT, the NZD/USD is trading .6990, up 0.0006 or +0.08%.

In other news, the RBNZ will leave monetary policy unchanged on Wednesday but could start to raise rates later this year, according to a Reuters poll, following recent data that showed rising inflationary pressures and a tightening labor market.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6923 will signal a resumption of the downtrend. A move through .7105 will change the main trend to up.

The NZD/USD is currently trading inside a long-term retracement zone at .7027 to .6923. It found support for a second time in less-than-a-month at .6923 on July 9. This zone is controlling the near-term direction of the Forex pair.

The minor range is .7243 to .6923. Its 50% level at .7083 is potential resistance.

The short-term range is .7316 to .6923. If the main trend changes to up then its retracement zone at .7120 to .7166 will become the primary upside target.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Tuesday is likely to be determined by trader reaction to the 50% level at .7027.

Bearish Scenario

A sustained move under .7027 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into .6923. Taking out this level will change the main trend to down with the November 23, 2020 main bottom at .6897 the next likely target. This price is a potential trigger price for an acceleration to the downside.

Bullish Scenario

A sustained move over .7027 will signal the presence of buyers. This could trigger a surge into the 50% level at .7083, followed by the main top at .7105. This is the last potential resistance before the short-term retracement zone at .7120 to .7166.