NZD/USD: Trade Through .6653 Shifts Momentum to Down

The New Zealand Dollar edged lower on Thursday in a volatile session that saw the currency pop to its highest level since January 21 before drifting lower into the close.

The Kiwi retreated from its intraday high after hotter-than-expected U.S. inflation data and hawkish comments from a Federal Reserve official unleashed a wave of bets on aggressive rate hikes, though similar pressures in New Zealand put a lid on the U.S. Dollar early in the session.

On Thursday, the NZD/USD settled at .6676, down 0.0006 or -0.09%.

Thursday data showed U.S. consumer prices up 7.5% year-on-year in January, a fourth straight month above 6% and slightly higher than economists’ forecast for a 7.3% rise.

After that, St. Louis Fed President James Bullard told Bloomberg he’d like to see 100 basis points of hikes by July.

The Reserve Bank of New Zealand (RBNZ) has already raised rates twice to 0.75% and is almost certain to hike again later this month, and perhaps by 50 basis points.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, the closing price reversal top suggests momentum may be getting ready to shift to the downside.

A trade through .6733 will negate the chart pattern and signal a resumption of the uptrend. A move through .6653 will confirm the closing price reversal top. This will shift momentum to the downside.

The short-term range is .6891 to .6529. Its retracement zone at .6710 to .6753 is resistance. This zone stopped the buying at .6733 on Thursday.

The first minor range is .6811 to .6529. The NZD/USD straddled this level on Thursday.

The second minor range is .6529 to .6733. Its retracement zone at .6631 to .6607 is the next downside target and potential support.

Short-Term Outlook

The direction of the NZD/USD early Friday is likely to be determined by trader reaction to .6670.

Bearish Scenario

A sustained move under .6670 will indicate the presence of sellers. Taking out .6653 will confirm the closing price reversal top. This could create the downside momentum needed to challenge .6631 – 6607. This is the last support before the .6590 main bottom.

Bullish Scenario

A sustained move over .6670 will signal the presence of buyers. The first upside target is .6710, followed by .6733 and .6753. The latter is a potential trigger point for an acceleration to the upside.