The New Zealand Dollar rose against the U.S. Dollar on Friday as fears over the Federal Reserve’s plans to aggressively hike interest rates appeared to ease and a key U.S. inflation reading showed a slowing rise in prices.

Additionally, the Kiwi continued to garner strength from the Reserve Bank’s (RBNZ) 50 basis point rate hike earlier in the week and its signal for more tightening this year to curb the risk of inflation becoming persistent.

On Friday, the NZD/USD settled at .6535, up 0.0055 or +0.85%.

In the U.S. on Friday, the Fed’s preferred inflation metric showed a 4.9% year-over-year rise in April. This result matched expectations and could be a sign that inflation is starting to decline.

In New Zealand on Wednesday, the Monetary Policy Committee of the RBNZ decided to lift the Official Cash Rate (OCR) to 2.00 percent from 1.50 percent. The decision came in line with economists’ expectations.

This was the fifth consecutive rate hike, which took the current OCR to its highest level since 2016.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through .6569 will change the main trend to up. A move through .6217 will signal a resumption of the uptrend.

The minor trend is up. A trade through .6550 will signal a resumption of the uptrend. A move through .6291 will change the minor trend to down.

On the downside, the support is a pair of 50% levels at .6467 and .6393.

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

Short-Term Outlook

Trader reaction to .6560 is likely to determine the direction of the NZD/USD early Monday.

Bullish Scenario

A sustained move over .6560 will indicate the presence of buyers. Taking out the main top at .6569 will change the main trend to up. This could trigger an acceleration into the main retracement zone at .6626 to .6722.

Bearish Scenario

A sustained move under .6559 will signal the presence of sellers. If this creates enough upside momentum then look for a break into .6467. If this level fails to hold then look for the selling to possibly extend into the next 50% level at .6393.

Side Notes

The week begins with the NZD/USD up 12 sessions from its last main bottom. This makes the Forex pair overextended and ripe for a closing price reversal top. It could start after buyers take out the main top at .6569 or following a test of the main retracement zone at .6626 to .6722.

For a look at all of today’s economic events, check out our economic calendar.