NZD/USD Forex Technical Analysis – Reverses Early Gains on US Rate Hike Fears

The New Zealand Dollar closed lower on Friday after hitting its highest level since April 27 amid the possibility of the Federal Reserve tightening its monetary policy after data showed stronger than expected growth in U.S. non-farm payroll employment in May.

On Friday, the NZD/USD settled at .6506, down 0.0054 or -0.82%.

In the U.S., the Labor Department’s closely watched monthly employment report showed job growth in the country exceeded economist estimates in May, jumping by 390,000 jobs, after surging by an upwardly revised 436,000 jobs in April.

Economists had expected employment to increase by about 325,000 jobs compared to the addition of 428,000 jobs originally reported for the previous month.

Meanwhile, the Labor Department said the unemployment rate remained unchanged at 3.6%. The unemployment rate was expected to edge down to 3.5%. The government report also showed average hourly earnings rose 0.3%, below the forecast, but matching April’s figure.

The better-than-estimated job increase indicates the economy is still strong, while the dip in average hourly wages suggests growth is starting to moderate amid a rebound in the labor force.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Friday when buyers took out the May 5 top at .6569. However, the closing price reversal top suggests momentum may be getting ready to shift to the downside. The main trend will change to down if sellers take out .6460.

On the upside, the first resistance is a 50% level at .6560, followed by a retracement zone at .6626 to .6722.

On the downside, the first support is a long-term 50% level at .6467. The new short-term range is .6217 to .6576. If the main trend changes to down then look for a test of its retracement zone at .6396 to .6354. The major support is a long-term Fibonacci level at .6231.

Daily Swing Chart Technical Forecast

Trader reaction to .6518 early Monday will likely determine the direction of the NZD/USD on Monday.

Bearish Scenario

A sustained move under .6518 will indicate the presence of sellers. A trade through .6501 will confirm the closing price reversal top, shifting momentum to the downside. This is likely to trigger a quick break into .6467 and .6460.

Taking out .6460 will change the main trend to down. This could trigger an acceleration into the short-term retracement zone at .6396 to .6354.

Bullish Scenario

A sustained move over .6518 will signal the presence of buyers. If this generates enough upside momentum then look for a retest of the 50% level at .6560, followed by the reversal top at .6576.

A trade through .6576 will indicate the return of buyers with the main retracement zone at .6626 to .6722 the next target area.