NZD/USD Forex Technical Analysis – With the Bullish News Price In, Kiwi Could Pullback into Value Zone

The New Zealand Dollar inched lower against the U.S. Dollar on Friday as investors lightened up a little on the upside following a surge into its highest level since June 8 the previous session.

The Kiwi surged on Thursday after the government reported a jump in consumer inflation to a ten-year high. This triggered an initial upside reaction but sellers came in since the news was likely priced in during the currency’s recent sixteen session rally.

On Friday, the NZD/USD settled at .7151, down 0.0007 or -0.10%.

The Reserve Bank (RBNZ) hiked rates earlier this month, and signaled further tightening to come, as it looks to keep inflation near its target 1-3% range, and to cool a red-hot housing market.

Bullish traders have been betting on more rate hikes from the RBNZ, but the strength in third quarter CPI probably solidifies a more aggressive hiking cycle.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside on Friday, following the confirmation of the previous session’s closing price reversal top.

A trade through .7219 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through .6860. This is highly unlikely, but there is room for a 2 to 3 day correction into a series of 50% levels.

The first support is a long-term Fibonacci level at .7121. This is paired with a 50% level at .7061. The next support is a pair of 50% levels at .7027 and .7012.

Near-Term Outlook

A closing price reversal top doesn’t change the main trend to down, but it could lead to a 2 to 3 day correction designed to alleviate some of the extreme upside pressure.

Additionally, now that the news is out about higher inflation and aggressive rate hiking from the RBNZ, traders may not feel the need to chase prices higher. Instead, they’ll probably be looking for value, which could lead to a pullback into support levels at .7061, followed by .7027 to .7012.

The next major move is also likely to be fueled by the Federal Reserve after it makes its monetary policy decisions on November 3.