NZD/USD Forex Technical Analysis – Weak Under .7265, Possible Acceleration to Downside Under .7204

The New Zealand Dollar is trading lower on Wednesday, pressured by weakness in its Australian counterpart, stronger-than-expected U.S. economic data, and perhaps the realization that a lot could happen to the economy to derail the Reserve Bank of New Zealand’s (RBNZ) plan to beginning raising rates as early as September 2022.

At 08:18 GMT, the NZD/USD is trading .7230, down 0.0023 or -0.31%.

It’s been a week since the RBNZ surprised traders by becoming one of three major central banks to signal a potential rate hike late next year and prices soared to their highest level since February 26. Since then, the Kiwi has drifted sideways-to-lower.

On Tuesday, the case for some tapering by the Federal Reserve was boosted by stronger-than-expected ISM Manufacturing PMI data. This helped boost the Greenback while pressuring the Kiwi.

New Zealand Dollar traders may have also been encouraged to take a little protection after news that the state of Victoria had extended its coronavirus lockdown for another seven days.

Despite the hawkish tone from the RBNZ last week, the minutes from its policy meeting showed the committee emphasized this projection was “conditional” on the economy evolving as expected. This comment may be raising doubts about the rate hike.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7316 will signal a resumption of the uptrend. A move through .7135 will change the main trend to down.

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.

The short-term range is .6943 to .7316. If the trend changes to down then its retracement zone at .7129 to .7085 will become the primary downside target.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to the Fibonacci level at .7266.

Bearish Scenario

A sustained move under .7265 will indicate the presence of sellers. This could create the downside momentum needed to challenge the 50% level at .7204. Since the main trend is up, buyers could come in on a test of this level.

Taking out .7204, however, could trigger an acceleration to the downside with potential targets coming in at .7135, .7129 and .7115.

Bullish Scenario

A sustained move over .7266 will signal the presence of buyers. If this move generates enough upside momentum then look for a surge into the recent high at .7316.