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NZD/USD Forex Technical Analysis – Facing Challenges with Rates Rising, Recession Looming

The New Zealand Dollar is trading steady-to-better on Thursday with buyers coming in to defend against an acceleration to the downside on a break under the recent main bottom at .6196.

The catalyst driving the Kiwi into nearly a two-year low on Thursday is a dire business survey that underlined the risk that rising interest rates would lead to recession.

At 08:21 GMT, the NZD/USD is at .6229, up 0.0006 or +0.10%.

The latest ANZ survey of New Zealand business sentiment made bleak reading with nearly 63% of firms expecting economic conditions to weaken over the coming year. The main drag was not a lack of demand but rather supply disruptions and surging cost pressures.

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The supply-constrained conditions are helping to hold inflation at high levels. This means the Reserve Bank of New Zealand (RBNZ) is likely to stick with its aggressive tightening plans even if it means risking a recession.

With other major central banks facing similar challenges, money is flowing into the U.S. Dollar for safe-haven protection. This is making the New Zealand Dollar a less-attractive investment.

Daily NZD/USD
Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down. A trade through .6196 will reaffirm the downtrend. A move through .6396 will change the main trend to up.

The NZD/USD is currently trading on the weak side of a long-term Fibonacci level at .6232, making it resistance. The next resistance is a minor 50% level at .6296.

Daily Swing Chart Technical Forecast

Trader reaction to .6223 is likely to determine the direction of the NZD/USD on Thursday.

Bearish Scenario

A sustained move under .6223 will indicate the presence of sellers. The first downside target is the main bottom at .6196.

Taking out .6196 could trigger an acceleration to the downside. The daily chart indicates there is no major support until the May 15, 2020 main bottom at .5921.

Bullish Scenario

A sustained move over .6223 will signal the presence of buyers. Overtaking the major Fibonacci level at .6232 will indicate the buying is getting stronger. This could trigger a surge into the pivot at .6296.

Side Notes

On Thursday, NZD/USD will be focused on several U.S. economic reports including Core PCE Price Index, Personal Income, Personal Spending and Unemployment Claims.

These reports are important because they could offer clues as to whether the Fed should maintain its aggressive tightening plans or pullback because the economy may be headed into recession.

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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