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James Hyerczyk

The New Zealand Dollar finished flat on Friday in a mostly lackluster trade. Risk appetite returned to the equity markets, but it wasn’t enough to sustain a strong rally by the Kiwi early in the session as investors continued to bet on further easing by the Reserve Bank of New Zealand (RBNZ).

On Friday, the NZD/USD settled at .6547, unchanged for the session. The Forex pair settled 3.13% lower for the week, having touched a one-month low of .6512 on Thursday.

Earlier in the week, New Zealand’s central bank hinted at further monetary easing while warning the economy may need support for a long time as the world grapples with the COVID-19 pandemic.

In New Zealand, the long-dated bonds were slightly higher, with yields down 1 basis point along the long-end of the curve.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The main trend turned down on Wednesday when sellers took out the main bottom at .6601. The main trend changes to up on a move through .6798.

The main range is .6381 to .6798. The NZD/USD is currently straddling its retracement zone at .6590 to .6540. This zone is controlling the longer-term direction of the Forex pair.

The new minor range is .6798 to .6512. Crossing to the strong side of the main retracement zone could trigger an acceleration into its retracement zone at .6655 to .6689.


Short-Term Outlook

Friday’s price action is proof that trader reaction to the main retracement zone will determine the longer-term direction of the NZD/USD. The high was .6592 and the low was .6528.

The downside momentum into the close suggests sellers are going to go after the lower or Fibonacci level at .6540 early next week.

Taking out .6540 could trigger a break into a main bottom at .6512. Taking out this level will reaffirm the downtrend with the main bottom at .6489 the next potential downside target. This is a potential trigger point for an acceleration to the downside.

The inability to sustain a break under .6540 will indicate the selling pressure is slowing, or it will signal the presence of aggressive counter-trend buyers. This could trigger a retest of the 50% level at .6590. Overcoming this level could fuel an acceleration to the upside with .6655 the minimum upside target.

For a look at all of today’s economic events, check out our economic calendar.
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