NZD/USD Forex Technical Analysis – Primary Upside Target Zone .6633 to .6668

The New Zealand Dollar closed slight better on Friday, but more importantly it posted its fourth consecutive higher-high while hitting its best level since June 11. The current five day rally is primarily being fueled by short-covering. The catalyst behind the short-covering are expectations of a sooner-than-expected rate cut by the U.S. Federal Reserve.

On Friday, the NZD/USD settled at .6588, up 0.0003 or +0.05%.

Traders expect the Reserve Bank of New Zealand (RBNZ) to leave rates on hold when they make their interest rate decision on Wednesday, June 26, but they may cut rates in August. In the meantime, traders have priced in a 100% chance of a Fed rate cut on July 31. The rally we’re seeing is traders adjusting their positions to reflect these expectations.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but the formation of a secondary higher bottom indicates a shift in momentum to the upside. The main trend will change to up on a trade through .6682. This is followed immediately by a main top at .6686.

A trade through .6487 will signal a resumption of the downtrend. This is followed by a main bottom at .6481 and the October 16, 2018 main bottom at .6465.

The short-term range is .6686 to .6481. The NZD/USD is currently testing its retracement zone at .6583 to .6608. Overcoming this zone will indicate the short-covering is getting stronger. Since the trend is down, sellers may come in to stop the rally. They are going to try to form a secondary lower top.

The main range is .6784 to .6481. Its retracement zone at .6633 to .6668 is the next upside target. This is the last potential resistance zone before the .6682 main top. Watch for sellers on the first test of this area.

Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at .6588, the direction of the NZD/USD on Monday is likely to be determined by trader reaction to the short-term 50% level at .6583.

Bullish Scenario

A sustained move over .6583 will indicate the presence of buyers. The first upside target is the short-term Fibonacci level at .6608. Overtaking this level will indicate the buying is getting stronger. This could generate the upside momentum needed to challenge the main 50% level at .6633. Watch for sellers on the first test of this level. Overcoming it, however, could trigger an acceleration to the upside with .6668 to .6682 the next likely upside targets.

Bearish Scenario

A sustained move under .6583 will signal the presence of sellers. This could indicate position-squaring ahead of the RBNZ interest rate decision on Wednesday. The first downside target is .6546.