NZD/USD Rally Stalls Inside .6833 – .6785 Retracement Zone

The New Zealand Dollar is trading higher Thursday after posting a highly volatile outside move, lower close the previous session. However, volume has nearly disappeared ahead of Friday’s bank holiday.

The Kiwi came under pressure after giving back all of its early gains on Wednesday after the Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate (OCR) as expected, but indicated in its post-meeting statement that the peak cash rate remains unchanged due to concerns about the global outlook.

At 12:13 GMT, the NZD/USD is trading .6818, up 0.0020 or +0.29%.

Today’s strength is being fueled by a weaker U.S. Dollar. It is on the back foot on Thursday as U.S. yields paused their march higher.

Treasury yields have been falling since the release of the U.S. consumer inflation report on Tuesday. It showed inflation figures were not quite as bad as some had feared.

The benchmark 10-year Treasury yield was 2.7120%. It rose steadily earlier this month – driven by expectations of more aggressive Federal Reserve tightening to combat inflation – and reached as high as 2.836% on Tuesday, ahead of U.S. inflation figures.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6755 will signal a resumption of the downtrend. A move through .6902 will change the main trend to up.

The short-term range is .6631 to .7034. The NZD/USD is currently trading inside its retracement zone at .6833 to .6785.

The intermediate retracement zone support is .6764 to .6708. This zone stopped the selling on Wednesday at .6755.

The main retracement zone resistance is .6874 to .6955. Inside this zone is a minor pivot at .6895.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Thursday is likely to be determined by trader reaction to the 50% level at .6833.

Bullish Scenario

A sustained move over .6833 will indicate the presence of buyers. If this move creates enough upside momentum then look for the short-covering rally to possibly extend into a pair of 50% levels at .6874 and .6895, followed by the main top at .6902.

Bearish Scenario

A sustained move under .6832 will signal the presence of sellers. This could lead to a retest of a Fibonacci level at .6785, a 50% level at .6764 or the low at .6755.

Side Notes

Buying strength and selling weakness is a hard strategy to follow when volume is well-below average.