The direction of the NZD/USD on Tuesday is likely to be determined by trader reaction to the main 50% level at .7204.
The New Zealand Dollar is edging higher against the U.S. Dollar early Tuesday while testing a key retracement area that has proved to be formidable resistance for nearly a month. The currency is coming back after a weak session on Monday amid weaker Treasury yields.
The recent rise in Treasury yields has stalled due to renewed expectations that U.S. interest rates will remain low for an extended period. This assessment was strengthened after Dallas Federal Reserve President Robert Kaplan on Monday reiterated his view that he does not expect interest rates to rise until next year, causing a further decline in bets that inflationary pressure could force the Fed to act sooner.
At 06:15 GMT, the NZD/USD is trading .7244, up 0.0031 or +0.42%.
The main trend is up according to the daily swing chart. A trade through .7115 will change the main trend to down. A move through .7305 will signal a resumption of the uptrend.
The minor trend is also up. A trade through .7135 will change the minor trend to down. This will shift momentum to the downside.
The main range is .7465 to .6943. The NZD/USD is currently testing its retracement zone at .7204 to .7266. This zone is controlling the near-term direction of the Forex pair. Buyers have had a hard time recently cracking this resistance area so when it goes, we could see a true breakout to the upside.
The short-term range is .6943 to .7305. Its retracement zone at .7124 to .7081 is support.
The direction of the NZD/USD on Tuesday is likely to be determined by trader reaction to the main 50% level at .7204.
A sustained move over .7204 will indicate the presence of buyers. The first upside target is the Fibonacci level at .7266. Sellers could come in on the first test of this level.
Taking out .7266 will indicate the buying is getting stronger. This could trigger a surge into the main top at .7305. This price is resistance, but also the trigger point for an acceleration to the upside. The daily chart indicates there is plenty of room to the upside with .7465 the next likely upside target.
A sustained move under .7204 will signal the presence of sellers. This move could trigger a sharp break into support at .7135, .7124 and .7115.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.