NZD/USD Forex Technical Analysis – Strengthens Over .6924, Weakens Under .6919; Could Form Reversal Bottom

The New Zealand Dollar is trading higher on Wednesday after reversing earlier weakness. The catalyst behind the turnaround is the Reserve Bank’s (RBNZ) decision to delay raising rates.

A little more than 24-hours ago experts had priced in a 25-basis point rate hike, but policymakers quickly changed gears after the country was put into a snap COVID-19 lockdown over a handful of new cases. Nonetheless, the central bank still expects a hike before year-end, Reuters said.

At 04:15 GMT, the NZD/USD is trading .6939, up 0.0021 or +0.30%.

The RBNZ left the official cash rate unchanged at a record low of 0.25% despite the economy running red-hot and a majority of analysts polled by Reuters last week expecting a hike.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Tuesday when sellers took out the July 20 main bottom at .6881. A trade through .6870 will reaffirm the downtrend.

A move through .7089 will change the main trend to up. This is highly unlikely but due to the prolonged move down in terms of price and time, the Kiwi may be ripe for a closing price reversal bottom. A closing price reversal bottom won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 day counter-trend rally.

The minor trend is also down. A trade through .7062 will change the minor trend to up. This will also shift momentum to the upside.

The longer-term range is .6589 to .7465. The NZD/USD is currently trading inside its retracement zone at .6924 to .7027.

The short-term range is .7089 to .6870. Its 50% level at .6980 is the first upside target.

The main range is .7316 to .6870. Its retracement zone at .7093 to .7146 is another potential upside target.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to .6919.

Bearish Scenario

A sustained move under .6919 will indicate the presence of sellers. The first downside target is a minor pivot at .6911, followed by .6870.

If the selling pressure is strong enough to take out .6870 then look for the move to extend into the November 13, 2020 main bottom at .6811.

Bullish Scenario

A sustained move over .6919 will signal the presence of buyers. Overtaking the Fib level at .6924 will indicate the buying is getting stronger. This could trigger a surge into .6980. Since the main trend is down, sellers could come in on the first test of this level.

Overcoming .6980 could trigger a further rally into .7027.

Side Notes

A close over .6919 will form a closing price reversal bottom on the daily chart. If confirmed, look for a minimum 2 to 3 day counter-trend rally.