The New Zealand Dollar fell on Friday as the general “risk-off” scenario in the financial markets weighed on demand for higher-yielding commodity currencies. Globally, market participants continued to monitor the outbreak of the coronavirus and updates on how badly it could dent growth in China, a major New Zealand trading partner.
On Friday, the NZD/USD settled at .6435, down 0.0003 or -0.05%.
The Forex pair continued to be supported by hawkish remarks from the Reserve Bank of New Zealand earlier in the week. Policymakers took a potential rate cut later in the year off the table, while saying it was still monitoring the economy for damage from the coronavirus outbreak.
Daily Technical Analysis
The main trend is down according to the daily swing chart. A trade through .6378 will signal a resumption of the downtrend. The main trend will change to up on a move through the last main top at .6503.
The NZD/USD is also trading inside a long-term retracement zone at .6481 to .6416. This is providing both support and resistance.
Inside the long-term retracement zone is the short-term .6441 to .6455 retracement zone. The NZD/USD straddled this area on Wednesday thru Friday last week.
Another major retracement zone comes in at .6498 to .6567. This zone is controlling the longer-term direction of the NZD/USD.
Last week’s closing price reversal bottom at .6378 on February 11 and subsequent confirmation indicates that momentum is trying to shift to the upside. This could eventually lead to a change in the trend. However, the number of retracement levels above the current close is going to make it difficult to rally over the short-run.
At best, buyers could continue to defend .6378, forming a support base in the process. However, don’t expect a breakout to the upside unless the current narrative changes. And what is that narrative?
Currently, the NZD/USD is being supported by the RBNZ’s hawkish outlook for the economy. However, gains are being capped by concerns over a slowdown in the global economy and the strength of the U.S. economy.
The NZD/USD could continue to trade sideways until real economic numbers start to come out of China. They should start to reflect the damage to the economy from the coronavirus outbreak.
The key area to watch on Monday is likely to be the retracement zone at .6441 to .6455. An upside bias could start to develop on a sustained move over .6455, while the downside bias is likely to continue on a sustained move under .6441.
This article was originally posted on FX Empire
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