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NZD/USD Forex Technical Analysis – Strong Short-Covering Rally after Fed Delivers Expected Rate Hike

The New Zealand Dollar rallied against its U.S. counter-part on Thursday as investors expressed relief the U.S. Federal Reserve did not go further than expected with its rate hike the previous session.

Traders were expecting the Fed to raise its benchmark rate by 75 basis-points on Wednesday, but several traders had priced in an even more aggressive rate hike.

Furthermore, Chairman Jerome Powell in his post-meeting press conference did not reveal any future plans for rate hikes although some thought he would signal an additional 75 basis-point rate hike in July and a 50 basis-point rate hike in September.

“Today’s 75 bp increase is an unusually large one,” Powell said. “I do not expect moves of this size to be common. From the perspective of today, either a 50 bp or a 75 bp increase seems most likely at our next meeting.”

On Thursday, the NZD/USD settled at .6363, up 0.0076 or +1.21%.

Although the Kiwi finished higher, the currency struggled early in the session after data showed an unexpected contraction in the economy. This suggests that Thursday’s rally was primarily fueled by short-covering rather than new buying.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6196 will signal a resumption of the downtrend. A move through .6576 will change the main trend to up.

The support is a long-term Fibonacci level at .6231. The first resistance is a minor pivot at .6386, followed by a long-term 50% level at .6467.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at .6386 is likely to determine the direction of the NZD/USD early Thursday.

Bullish Scenario

A sustained move over .6386 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the major long-term 50% level at .6467. Since the main trend is down, sellers are likely to come in on a test of this level.

Bearish Scenario

A sustained move under .6386 will signal the presence of sellers. The first target is a minor pivot at .6296. If this level fails then look for the selling to extend into the Fibonacci level at .6231, followed by the main bottom at .6196.

The main bottom at .6196 is a potential trigger point for an acceleration to the downside with the eventual target the May 15, 2020 main bottom at .5921.

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

This article was originally posted on FX Empire