NZD/USD Forex Technical Analysis – .6805 Could Be Trigger Point for Acceleration to Downside
The New Zealand Dollar is down sharply late Friday as fears of a new COVID variant in South Africa started to rise overnight after the U.K. suspended flights from six African countries. According to scientists, more than 30 mutations have been detected in the new variant, raising concern that it could possibly better evade the antibody protection created by vaccines and prior infections.
At 20:52 GMT, the NZD/USD is trading .6818, down 0.0038 or -0.55%.
Despite the global sell-off in nearly all asset classes, traders cautioned that Friday was the day after a major U.S. holiday and traditionally a low-volume day so many of the responses to the news may have been exaggerated.
Nonetheless, there is still a real fear that some of the hawkish central banks like the Reserve Bank of New Zealand (RBNZ) will curtail plans to raise rates if the pandemic emerges. This would weigh on the Kiwi.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. On Friday, the downtrend was reaffirmed when the NZD/USD inched through the August 20 main bottom at .6806.
We’re expecting to see a lot more downside pressure, however, if the new low for the year at .6805 is taken out by aggressive sellers.
Traders should note that the daily chart indicates there is plenty of room to the downside with the November 2, 2020 main bottom at .6589 the next major target. Given this set up, don’t be surprised by the start of an acceleration to the downside.
On the upside, the nearest resistance is a trailing pivot at .6929.
The trend in motion suggests the selling pressure is likely to continue. With support spread wide apart, the only bottoming signal that we’re looking for is a closing price reversal bottom. We don’t expect to see a valid change in trend until the market forms a support base.
The closing price reversal bottom won’t change the main trend but it could trigger the start of a 2 to 3 day relief rally.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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