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The New Zealand Dollar is edging higher on Monday, clawing through resistance levels and getting close to changing the main trend to up. The strength in the Kiwi is being attributed to the combination of a hawkish central bank and speculation the Federal Reserve will go slower once it has hike by 100 basis points over the next two months.
At 05:29 GMT, the NZD/USD is trading .6553, up 0.0018 or +0.27%.
The Reserve Bank of New Zealand (RBNZ) has been very aggressive this year, having already hiked by 50 basis points (bps) twice to 2.0% and aiming to reach at least 3.25% by year end.
That outlook could change should the economy slow more quickly than expected, the RBNZ’s chief economist told Reuters on Monday. However, he emphasized the Board was really worried that inflation expectations could run away from them, suggesting they were inclined to keep tightening at a fast pace.
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 change the main trend to down.
The minor trend is up. This is controlling the momentum. A trade through .6291 will change the minor trend to down.
On the upside, the nearest resistance is a 50% level at .6560. The next resistance area is a retracement zone at .6626 to .6722.
On the downside, the nearest support is a long-term 50% level at .6467.
Daily Swing Chart Technical Forecast
Trader reaction to .6535 is likely to determine the direction of the NZD/USD on Monday.
Bullish Scenario
A sustained move over .6535 will indicate the presence of buyers. The first upside target is a 50% level at .6560. Overtaking this level could lead to a test of the main top at .6569.
A trade through .6569 will change the main trend to up with .6626 to .6722 the next key target zone. Aggressive counter-trend sellers could come in on a test of this area.
Bearish Scenario
A sustained move under .6535 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into a 50% level at .6467.
Side Notes
Following the prolonged move up in terms of price and time, a close under .6535 will form a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 correction.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire