The New Zealand Dollar plunged last week as investors reacted to a steep sell-off in the global equity markets. The catalysts behind the selling pressure were concerns that the spread of the coronavirus would lead to a global recession.
Traders also priced in the strong possibility of a sooner-than-expected rate cut by the Reserve Bank of New Zealand. This week traders are likely to be influenced by the Reserve Bank of Australia’s interest rate and monetary policy decision. The RBA is expected to cut its benchmark rate. Furthermore, the Federal Reserve is also likely to trim rates 25 basis points later in the month.
Last week, the NZD/USD settled at .6247, down 0.0106 or -1.66%.
On Friday, the Kiwi received a little boost after Fed Chair Jerome Powell suggested the Fed would cut rates if necessary to soften the blow from the steep losses in the equity markets. He also added the economy was still solid.
Weekly Technical Analysis
The main trend is down according to the weekly swing chart. The downtrend was reaffirmed when sellers took out the recent main bottom at .6204. If this move is able to generate enough downside momentum then look for the selling to possibly extend into the next major bottom at .5485 over the long-term.
The NZD/USD is in no position to change the main trend to up, but due to the prolonged move down in terms of price and time, it is inside the window of time for a potentially bullish closing price reversal bottom.
A closing price reversal bottom won’t change the main trend to up, but it could lead to a two to three week counter-trend rally.
The nearest resistance is a downtrending Gann angle, moving down at a rate of .004 per week. This week, the angle drops in at .6396. Look for the downtrend to continue as long as the NZD/USD remains under this angle.
This article was originally posted on FX Empire
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