NZD/USD Forex Technical Analysis – Weekly Retracement Zone at .6633 to .6697 May Have Stopped Rally

The New Zealand Dollar finished higher last week as short-sellers covered and aggressive counter-trend buyers explored the long side in reaction to a plunge in U.S. Treasury yields, which made the U.S. Dollar a less-attractive investment. The catalysts behind the rally were dovish remarks from Federal Reserve Chairman Jerome Powell, which opened the door to a potential rate cut, and a weaker-than-expected U.S. Non-Farm Payrolls report, which raised the odds of a June or July rate cut.

Last week, the NZD/USD settled at .6664, up 0.0127 or +1.94%.

We could see pressure early in the week because over the week-end, the U.S. announced a postponement of the tariffs against Mexico, which were expected to start on June 10. The threat of tariffs was one of the factors driving down Treasury yields last week. Look for the U.S. Dollar to strengthen if Treasury yields firm.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom at .6481 the week-ending May 24.

A trade through .6481 will negate the reversal bottom and signal a resumption of the downtrend. This could lead to an eventual test of the next main bottom at .6424.

The minor trend is also down. A trade through .6784 will change the minor trend to up.

The main range is .6424 to .6970. Its retracement zone at .6633 to .6697 is the primary upside target. It is currently being tested. Trader reaction to this zone could determine the direction of the NZD/USD this week.

The minor range is .6939 to .6481. Its retracement zone at .6710 to .6764 is the next potential upside target.

Combining the two retracement zones creates a potential resistance cluster at .6697 to .6710. Since the main trend is down, we’ll be looking for a selling opportunity on a test of this area.

Weekly Technical Forecast

Based on last week’s price action and the close at .6664, the direction of the NZD/USD is likely to be determined by trader reaction to the Fibonacci level at .6633.

Bullish Scenario

A sustained move over .6633 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into a price cluster at .6697 to .6699. This is followed closely by another 50% level at .6710. Since the main trend is down, look for sellers on the first test of this area.

Overcoming .6710 could trigger an acceleration to the upside with the next target the Fibonacci level at .6764.

Bearish Scenario

A sustained move under .6633 will signal the presence of sellers. This could trigger a break into the uptrending Gann angle at .6601. If this angle fails then look for the sell-off to possibly extend into uptrending Gann angles at .6541 and .6511. The latter is the last potential support angle before the .6481 main bottom.

Overview

A “risk on” tone could drive U.S. Treasury yields lower. This should support the U.S. Dollar, while putting pressure on the New Zealand Dollar.