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NZD/USD Forex Technical Analysis – Set-Up for Breakout Over .6074

James Hyerczyk

The New Zealand Dollar posted a strong gain on Friday in reaction to a dire U.S. unemployment report from the previous day and another pledge of unlimited easing by the Federal Reserve. Like the Australian Dollar and the Euro, the rally wasn’t fueled by expectations of a recovery in the New Zealand economy. The move was fueled by the flooding of the financial markets with U.S. Dollars.

On Friday, the NZD/USD settled at .6043, up 0.0084 or +1.41%.

Additionally, the RBNZ on Friday said it would buy NZ$1.35 billion of NZ government paper next week, almost twice the NZ$750 million it had initially signaled.

Daily NZD/USD

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending to the upside. A trade through .6448 will change the main trend to up. A move through the last main bottom at .5469 will signal a resumption of the downtrend.

The minor trend is up. The minor trend turned up on Thursday when buyers took out the minor top at .5913. This move shifted momentum to the upside. A trade through .5778 will change the minor trend to down.

The short-term range is .6448 to .5469. Its retracement zone at .5958 to .6074 is currently being tested. This zone is controlling the near-term direction of the NZD/USD.

Short-Term Outlook

On Friday, the NZD/USD closed in a position to challenge the upper level of the retracement zone at .6074. Given the momentum into the close, we’re likely to take out this level, perhaps triggering an acceleration to the upside.

A failure to overcome .6074 won’t be sign of a major top, but it will indicate the presence of sellers. Breaking back under a price cluster formed by a 50% level at .5958 and a steep uptrending Gann angle at .5949 will signal the presence of sellers. This will be a sign of renewed weakness that could trigger an eventual 50% correction of the current rally from .5469 to .6070.

Essentially, the near-term direction of the NZD/USD will be determined by trader reaction to .5958 to .6074. Look for a breakout over .6074 if investors continue to dump U.S. Dollars. Watch for sellers to try to form a potentially bearish secondary lower top.

This article was originally posted on FX Empire

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