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NZD/USD Forex Technical Analysis – Trader Reaction to .6567 Should Set the Tone on Thursday

James Hyerczyk

The New Zealand Dollar is trading higher late Wednesday, rebounding from earlier session weakness. The currency was likely underpinned by position-squaring ahead of Thursday’s quarterly GDP and Trade balance data.

Steady demand for risky assets may have also supported the Kiwi, but a sharp rise in U.S. Treasury yields likely put a lid on the rally. Continuing to weigh on the currency were expectations of a February rate cut by the Reserve Bank of Australia (RBA). Earlier in the week, the New Zealand Dollar fell in sympathy with the Australian Dollar after the RBA signaled an earlier than expected rate cut.

Look for volatility with the release of the GDP and Trade Balance reports at 21:45 GMT.

At 21:13 GMT, the NZD/USD is trading .6581, up 0.0007 or +0.11%.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on December 13 at .6636.

A trade through .6636 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through .6522.

The main range is .6791 to .6204. Its retracement zone at .6567 to .6497 is support. This zone is controlling the longer-term direction of the NZD/USD.

The short-term range is .6204 to .6636. Its retracement zone at .6420 to .6360 is a potential downside target.

Daily Swing Chart Technical Forecast

Based on Wednesday’s price action, the direction of the NZD/USD on Thursday is likely to be determined by trader reaction to the Fibonacci level at .6567.

Bullish Scenario

A sustained move over .6567 will indicate the presence of buyers. The first target is a pivot at .6595. A failure at this level will indicate that sellers have re-emerged. They are going to try to form a secondary lower top.

Taking out .6595 could trigger a surge into the main top at .6636.

Bearish Scenario

A sustained move under .6567 will signal the presence of sellers. If this move creates enough downside momentum then look for a break into the main bottom at .6522. Taking out this level will change the main trend to down with .6497 the next major downside target.

Side Notes

New Zealand quarterly GDP is expected to come in at 0.5%, unchanged from the previous quarter. The Trade Balance is expected to show a deficit of 700 Million, better than the previously reported 1013 Million deficit.

Better than expected data could be supportive for the NZD/USD because it will encourage the Reserve Bank of New Zealand (RBNZ) to further delay their next rate cut.

This article was originally posted on FX Empire