NZD/USD Likely to Feel Downside Pressure Under .6710

The New Zealand Dollar closed a little better on Friday but off its high as risk sentiment soured throughout the day due to fear of a Russian invasion of Ukraine.

Earlier in the session, the Kiwi rose as hawkish traders bet on a 25-basis point rate hike by the Reserve Bank (RBNZ) at its next policy meeting on February 22.

On Friday, the NZD/USD settled at .6695, up 0.0002 or +0.04%.

Some NZD/USD investors are looking for a 50-basis point rate hike with a consensus looking for rates to reach 2.5% by the end of the year before leveling off. There is also speculation that central bank policy makers could lift its projected peak for rates to 3.0% this week.

Besides the RBNZ policy meeting, New Zealand Dollar traders will be focusing on the escalating situation in Eastern Europe. If war breaks out then look for the NZD/USD to tumble since investors would shed the riskier currency, while moving money into the U.S. Dollar for projection.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6733 will reaffirm the uptrend. A move through .6593 will change the main trend to down.

The main range is .6891 to .6529. Its retracement zone at .6710 to .6753 is resistance. It stopped the selling at .6733 on February 10 and at .6730 on Friday. The upper or Fibonacci level at .6753 is also the trigger point for an acceleration to the upside.

The minor range is .6593 to .6730. Its 50% level at .6661 is the next downside target.

The short-term range is .6529 to .6733. Its retracement zone at .6631 to .6607 is the best support area. The lower or Fibonacci level at .6607 is the last support before the main bottoms at .6593 and .6590.

Short-Term Outlook

We’re likely to be in a news driven mode throughout the week with the strong possibility of heightened volatility as investors deal with the situation in Ukraine and the RBNZ interest rate decision.

The key area to watch is .6710 to .6753. Look for a downside bias to develop on a sustained move under .6710, and for the uptrend to strengthen on a sustained move over .6753.

If the selling pressure is strong enough to take out .6593 then the trend will change to down. If .6590 fails as support then look for an acceleration to the downside.