The New Zealand Dollar is trading lower for a third session on Wednesday as technical factors and bearish reports from Australia and China continue to weigh on the Kiwi’s performance. After posting four consecutive higher closes last week, the currency could be getting ready to resume its downtrend.
The recent rally wasn’t a trend changing event, but was likely designed to alleviate some of the excessive selling pressure that had been building after the Reserve Bank of New Zealand (RBNZ) surprised the markets with a 50-basis point rate cut on August 7. The RBNZ is expected to hold rates steady at its September 24 meeting.
After the U.S. and China announced the resumption of their trade talks last week, the timing of the next interest rate cuts from the RBNZ has been pushed back by one month. Traders are now pricing in a November 2019 rate cut.
At 03:04 GMT, the NZD/USD is trading .6415, down 0.0008 or -0.12%.
Daily Technical Analysis
The main trend is down according to the daily swing chart. A new main top has formed at .6445. This is major news because a trade through .6445 will change the main trend to up. A move through .6269 will signal a resumption of the downtrend.
The short-term range is .6269 to .6445. Its retracement zone at .6357 to .6336 is the next downside target. Aggressive counter-trend buyers could come in on a test of this area. They will be trying to form a secondary higher bottom.
The intermediate range is .6588 to .6269. Its retracement zone at .6429 to .6466 is acting like resistance. This zone stopped the rally at .6445 on Monday.
The main range is .6791 to .6269. Its retracement zone at .6530 to .6592 is the major upside target area.
Daily Technical Forecast
Based on the early price action and the current price at .6415, the direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to the intermediate 50% level at .6429.
A sustained move under .6429 will indicate the presence of sellers. Crossing to the weak side of a downtrending Gann angle at .6411 will indicate the selling is getting stronger. This is followed by an uptrending Gann angle at .6389. If this angle fails then look for the selling to possibly extend into the short-term retracement zone at .6357 to .6336.
A sustained move over .6429 will signal the presence of buyers. This could lead to a test of the main top at .6445. Taking out this top will change the main trend to up with .6466 the next target. Overcoming this level could trigger an acceleration to the upside.
The next major move will be determined by trader reaction to a pair of retracement zones at .6357 to .6336 and .6429 to .6466.
The price action suggests the bearishness has dampened quite a bit since the announcement of the resumption of trade talks between the United States and China. Furthermore the next rate cut has been pushed into November from September so I wouldn’t be that aggressive on the short side at current price levels. Chances of a rate cut at that time are about 67%. This is the last RBNZ meeting of the year.
This article was originally posted on FX Empire
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