The New Zealand Dollar rose early Thursday on the back of increased demand for risky assets and a weaker U.S. Dollar. Driving the price action was news that Gilead Sciences remdesivir drug had shown positive results in government-run trials. However, buyers couldn’t hold on to those early gains because of strong end of the month profit-taking. This led to the formation of a closing price reversal top that could shift momentum to the downside if confirmed.
On Thursday, the NZD/USD settled at .6128, down 0.0004 or -0.07%.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. It turned up earlier in the week when buyers took out a pair of swing tops at .6092 and .6131. Momentum is about to shift to the downside, however, with the formation of a potentially bearish closing price reversal top.
The closing price reversal top won’t change the main trend to down, but if confirmed, it could lead to the start of a 2 to 3 counter-trend break.
The main trend will change to down on a trade through .5911. This is highly unlikely. A trade through .6176 will negate the closing price reversal top and signal a resumption of the uptrend.
The main range is .6448 to .5469. Its retracement zone at .6074 to .5958 is the next support area. This zone is also controlling the near-term direction of the NZD/USD.
The short-term range is .5911 to .6176. Its 50% level at .6043 is another potential support level.
Daily Swing Chart Technical Forecast
Based on Thursday’s price action and the close at .6128, the direction of the NZD/USD on Friday is likely to be determined by trader reaction to yesterday’s low at .6107.
Taking out .6107 will confirm the closing price reversal top. A sustained move under this level will indicate the selling is getting stronger. This should lead to a test of the main Fibonacci level at .6074. If this level fails then look for the selling to possibly extend into the minor pivot at .6043. This is also a potential trigger point for an acceleration to the downside.
A sustained move over .6107 will signal the return of buyers. If this move creates enough upside momentum then look for the buying to possibly extend into .6176.
This article was originally posted on FX Empire
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