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NZD/USD Forex Technical Analysis – Underpinned by Improving Risk Sentiment, Capped by Global Recession Fears

The New Zealand Dollar is edging higher against the U.S. Dollar on Thursday, as shares rose on Wall Street and in Asia, even though caution prevailed on signs of a slowdown in the U.S. economy. Despite the uptick, overall investor sentiment remained subdued due to the possibility of the global economy heading into an economic slowdown amid tighter monetary policies.

At 04:58 GMT, the NZD/USD is trading .6183, up 0.0032 or +0.56%.

Traders are also responding to the Federal Reserve’s minutes from its June policy meeting released late Wednesday. The price action suggests traders were phased by the minutes since the results contained no surprises and what was delivered was probably already priced into the market.

Risk sentiment improved as stocks climbed following the release of the Federal Reserve’s June meeting minutes. Central bank officials reiterated a tough stance against inflation, saying another 50- or 75-basis point move would “likely be appropriate” at the July 26-27 meeting.

In other news, the Reserve Bank of New Zealand (RBNZ) is likely to stick to its aggressive tightening path even if it meant risking a recession. Traders are pricing in another hike of 50 basis points in July to take rates to 2.50%, and for rates to near 4% by the end of the year.


Short-Term Outlook

Trader reaction to the minor pivot at .6189 is likely to determine the direction of the NZD/USD early in the session on Thursday.

Bullish Scenario

A sustained move over .6189 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into a long-term Fibonacci level at .6232.

Since the main trend is down, watch for sellers on the first test of .6232. Overtaking this level, however, could lead to a test of the minor bottom at .6252, and a short-term 50% level at .6261.

The minor trend will change to up on a trade through .6252. This will shift momentum to the upside.

Bearish Scenario

A sustained move under .6188 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into this week’s low at .6125.

Taking out .6125 will reaffirm the downtrend. This could even trigger an acceleration to the downside with the May 15, 2020 main bottom at .5921 the next major target.

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

This article was originally posted on FX Empire