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NZD/USD Forex Technical Analysis – “Flash Crash” Selling Drives Kiwi to Weak Side of Key Retracement Levels

James Hyerczyk

The New Zealand Dollar spiked sharply lower against the U.S. Dollar early Thursday in a move investors said was fueled by a wave of automated selling against the Japanese Yen. Traders said the so-called “flash crash” may have been fed by a “drought of liquidity and a cascade of computerized sales.”

At 0616 GMT, the NZD/USD settled at .6624, down 0.0029 or -0.44%.

Traders said the move was technical in nature and had nothing to do with the fundamentals. The New Zealand Dollar plunged in sympathy with the U.S. Dollar and Australian Dollar before trading calmed and humans took control of the situation.

Daily NZD/USD

Daily Technical Swing Chart Analysis

The main trend is down according to the daily swing chart. After a spike to .6837 on New Year’s Day (probably a Flash Rally), the downtrend resumed on Wednesday when sellers took out the last swing bottom at .6692.

The main range is .6424 to .6970. Its retracement zone at .6697 to .6633 is controlling the longer-term direction of the Forex pair.

The intermediate range is .6465 to .6970. Its retracement zone is .6718 to .6658.

Combining the two retracement zones creates a pair of potential price clusters at .6718 to .6697 and .6658 to .6633. This zone can act like resistance or pivot areas over the near-term.

Daily Technical Swing Chart Forecast

Based on the early price action and the current price at .6628, the direction of the NZD/USD the rest of the session is likely to be determined by trader reaction to the main Fibonacci level at .6633.

Bullish Scenario

Overtaking and sustaining a rally over .6633 will indicate the presence of buyers. The first upside target is a short-term Fibonacci level at .6658. Since the main trend is down, we could see sellers on the first test of this level.

The Fib at .6658 is also the trigger point for an acceleration into a pair of 50% levels at .6697 and .6718. Sellers could come in on a test of this area, however, look for an acceleration to the upside if buyers take out .6718 with conviction.

Bearish Scenario

A sustained move under .6633 will indicate the presence of sellers. If this move creates enough downside momentum then look for a test of the “flash crash” low at .6591.

If sellers take out .6591 with conviction then look for an acceleration to the downside with the next major target the October 26 bottom at .6465, followed by the October 8 bottom at .6424.

This article was originally posted on FX Empire

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