NZD/USD Reaction to .6955 Sets Next Week’s Tone

The New Zealand Dollar closed lower on Friday but held onto enough of its gains to post another higher close on the weekly chart.

The Kiwi was strong throughout the week, but ran into resistance amid concerns about the risk that higher rates and imported inflation via energy costs can hurt the economy. Meanwhile, New Zealand Bonds took a hit after a hawkish speech from Federal Reserve Chair Jerome Powell.

On Friday, the NZD/USD settled at .6957, down 0.0008 or -0.11%.

Exerting the most pressure on the New Zealand Dollar on Friday was a rebound in its U.S. counterpart. A sharp rise in U.S. Treasury yields made the U.S. Dollar a more attractive investment.

The benchmark 10-year U.S. Treasury yield hit a fresh two-year high Friday as investors anticipate a more aggressive Fed. The 10-year rate at its high of Friday’s session hit 2.503%, its highest level since May 2019. The yield started the week near 2.15%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6989 will signal a resumption of the uptrend. A trade through .6729 will change the main trend to down.

The minor trend is also up. A trade through .6865 will change the minor trend to down. This will shift momentum to the downside.

The NZD/USD settled on the strong side of a long-term retracement zone at .6955 to .6874, making this area support.

The minor range is .6865 to .6989. Its 50% level at .6927 is additional support.

The short-term range is .6729 to .6989. If the minor trend changes to down then its 50% level at .6859 will become the next target.

Short-Term Outlook

The daily chart indicates that buyers are trying to defend the long-term Fibonacci level at .6955. If successful then look for a surge into last week’s high at .6989.

Taking out .6989 will indicate the buying is getting stronger. If this move creates enough upside momentum then look for an acceleration into a pair of long-term main tops at .7053 and .7081.

On the downside, a failure to hold .6955 will indicate the presence of sellers. This could trigger a quick break into the minor pivot at .6927.

Taking out the minor pivot at .6927 will indicate the selling pressure is getting stronger with a support cluster at .6874, .6865 and .6859 the primary target.