NZD/USD Forex Technical Analysis – Weaker as Narrative Shifts Back to Higher US Rates, Stronger Greenback

The New Zealand Dollar is edging lower on Wednesday while the U.S. Dollar found support, following U.S. inflation data and remarks from central bank officials that have investors worrying U.S. interest rates are going to be higher for longer.

At 04:04 GMT, the NZD/USD is trading .6303, down 0.0033 or -0.52%.

Headline U.S. consumer inflation (CPI) came in at 6.4% year-on-year for January, a bit higher than the 6.2% economists had expected, setting off selling in the bond market and Fed funds futures as hopes that rates could be cut later this year grow dimmer and dimmer.

Fed funds futures now imply a peak above 5.2% by mid-year and rates above 5% at year’s end.

Hawkish Fed rhetoric and yesterday’s CPI data has shifted the narrative back to the stronger U.S. Dollar even though the Reserve Bank of New Zealand (RBNZ) could raise rates 50 – 75 basis points at its next meeting.

Daily NZD/USD Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower.

A trade through .6289 will change the main trend to down. A move through .6389 will signal a resumption of the uptrend.

The minor range is .6270 to .6389. The NZD/USD is trading on the weak side of its pivot at .6330, making it resistance. Additional resistance is a 50% level at .6365.

On the downside, the major support is a long-term Fibonacci level at .6231.

Daily NZD/USD Technical Forecast

Trader reaction to the minor pivot at .6330 is likely to determine the direction of the NZD/USD on Wednesday.

Bearish Scenario

A sustained move under .6329 will indicate the presence of sellers. Taking out the main bottom at .6289 will change the main trend to down. This could lead to a quick test of another main bottom at .6270. If this price fails then look for the selling to possibly extend into the major long-term support at .6231.

Bullish Scenario

A sustained move over .6330 will signal the presence of buyers. This could lead to a labored rally with the first upside targets .6365 and .6389.

Additional resistance is lined up at .6404, .6436 and .6467.

Side Notes

Look for volatility following the release of the U.S. retail sales report at 13:30 on Wednesday.