NZD/USD Weakness Has Put .6785 – .6708 Support Zone on Radar

The New Zealand Dollar closed sharply lower on Friday, while posting its first loss in four weeks and a potentially bearish weekly closing price reversal top. The catalysts behind the sell-off were concerns over a series of aggressive rate hikes by the U.S. Federal Reserve. Weak commodity prices, including crude oil and gold, also weighed on the risk-sensitive currency.

On Friday, the NZD/USD settled at .6848, down 0.0044 or -0.63%.

The tightening of the spread between New Zealand Government bonds and U.S. Government bonds was primarily responsible for driving the U.S. Dollar higher versus its New Zealand counterpart. On Friday, the 10-year Kiwi bond settled at 3.274%, while the U.S. 10-year Treasury note settled at 2.740%.

The yield on the benchmark 10-year Treasury note hit a fresh 3-year high on Friday as investors continued to digest minutes from the previous Fed meeting.

On Wednesday, the Fed minutes indicated that the central bank plans shrink its balance sheet by $95 billion a month. Fed officials also suggested there could be one or more 50-basis point interest rate hikes in the cards.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7034 will change the main trend to up. The next target is the March 15 main bottom at .6729.

The NZD/USD settle below the long-term retracement zone at .6874 to .6955, making it resistance.

On the downside, the first potential support is the short-term retracement zone at .6832 to .6785. This followed by the intermediate-term retracement zone at .6764 to .6708. The two zones combine to form a key support cluster at .6785 to .6764. We could see a technical bounce on the first test of this area.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD early Monday is likely to be determined by trader reaction to the short-term 50% level at .6832.

Bullish Scenario

A sustained move over .6832 will indicate the presence of buyers. If this move creates enough upside momentum then look for a test of the main 50% level at .6874. This is a potential trigger point for an acceleration into a minor pivot at .6928, followed by the main Fibonacci level at .6955.

Bearish Scenario

A sustained move under .6955 will signal the presence of sellers. The next target is the support cluster at .6785 to .6764. Watch for a technical bounce on the first test of this area.

If .6764 fails as support then look for the selling to possibly extend into the main bottom at .6729, followed by the intermediate Fibonacci level at .6708.