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NZD/USD Forex Technical Analysis – Weakens Under .6589; Possible Short-Covering Rally Over .6607

James Hyerczyk
·3-min read

The New Zealand Dollar is being pressured on Wednesday by a stronger U.S. Dollar and a dovish Reserve Bank of New Zealand (RBNZ) that left the door open for more interest rate cuts.

Early in the session, the RBNZ held its official cash rate at a record low and hinted at further easing while warning the economy may need support for a long time as the world grapples with the coronavirus pandemic.

At 06:00 GMT, the NZD/USD is trading .6613, down 0.0021 or 0.31%.

The RBNZ also retained its large scale asset purchase (LSAP) program at NZ$100 billion ($66.1 billion).

It added that further stimulus may be needed and that it was prepared to use additional tools like a cheap funding facility for banks, negative rates, and purchases of foreign assets.

Daily NZD/USD
Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trade through .6601 earlier in the session changed the main trend to down. The main trend will change to up on a move through .6798. This is highly unlikely, but there is room for a counter-trend 50% to 61.8% retracement especially if the Forex pair closes higher today.

The main range is .6381 to .6798. Its retracement zone at .6589 to .6540 is the primary downside target. Trader reaction to this zone could determine the longer-term direction of the NZD/USD.

The short-term range is .6489 to .6798. The NZD/USD is currently straddling its retracement zone at .6607 to .6644. Trader reaction to this zone could determine the direction of the Forex pair on Wednesday.

The minor range is .6798 to .6599. If momentum shifts to the upside, we could see a near-term rally into its retracement zone at .6699 to .6722.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to the short-term Fibonacci level at .6607.

Bearish Scenario

A sustained move under .6607 will indicate the presence of sellers. This could trigger a quick break into the intraday low at .6599, followed by the main 50% level at .6589.

Watch for a technical bounce on the first test of .6589, but if it fails then look for a possible acceleration to the downside with the main Fibonacci level at .6540 the next likely target.

Bullish Scenario

A sustained move over .6607 will signal the presence of buyers. This could trigger a short-covering rally into the short-term 50% level at .6644. Since the main trend is down, sellers could return on a test of this level. Overcoming it, however, could trigger an acceleration to the upside.

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

This article was originally posted on FX Empire

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