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NZD/USD Forex Technical Analysis – Main Trend Changed to Up But Needs Help from China to Sustain Rally

The New Zealand Dollar closed higher on Friday, posting a dramatic reversal to the upside after early session weakness. The strong rebound was fueled by a recovery in China’s major equity indexes, which rallied over 2.50 percent after government officials announced measures to support the economy and the stock market.

The Kiwi was also boosted earlier in the week from higher than expected consumer inflation data. The news prompted some investors to reassess the Reserve Bank’s threat to cut interest rates.

On Friday, the NZD/USD settled at .6591, up 0.0047 or +0.72%.

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Daily NZD/USD

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 previous main top at .6602. The move also made .6525 a new main bottom. A trade through this level will change the main trend to down.

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The main range is .6700 to .6424. Its retracement zone at .6562 to .6595 is controlling the near-term direction of the NZD/USD.

The minor range is .6424 to .6607. Its retracement zone at .6515 to .6494 is new support.

Daily Swing Chart Technical Forecast

Based on Friday’s close at .6591, the direction of the NZD/USD on Monday is likely to be determined by trader reaction to the main Fibonacci level at .6595.

A sustained move over .6595 will indicate the presence of buyers. This could lead to a quick test of last week’s high at .6607.

The daily chart indicates there is plenty of room to the upside over .6607 so don’t be surprised by a potential acceleration to the upside. The next major top is .6700.

A sustained move under .6595 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to extend into the main 50% level at .6562.

The daily chart also opens up to the downside under .6562 so if this move attracts sellers then look for a potential move into .6525 and .6515.

The basic fundamentals are still bearish due to the divergence in the monetary policies of the U.S. Federal Reserve and the Reserve Bank of New Zealand, however, the NZD/USD could get a boost from a further recovery in China’s stock market.

This article was originally posted on FX Empire

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