NZD/USD Forex Technical Analysis – Closing Price Reversal Top May Be Indicating Momentum Shift

Profit-taking ahead of the long holiday weekend drove the News Zealand Dollar lower on Thursday as investors wrapped up the new year with a solid 7.35% gain. Sellers helped form a closing price reversal top chart pattern that could be an early sign of a shift in momentum to the downside.

On Thursday, the NZD/USD settled at .7183, down 0.0023 or -0.32%.

Heading into the new year, investors will be watching runoff elections in Georgia for two Senate seats the first week in January. If the Republicans win one or both of the Georgia seats, they will retain a slim majority in the chamber and can block Biden’s legislative goals and judicial nominees.

If the Democrats win then it should be smooth sailing for Biden’s agenda, which includes more measures to support the U.S. economy after he is inaugurated on January 20. This should continue to pressure the U.S. Dollar.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, the formation of the closing price reversal top may be an indication of an impending shift in momentum.

A trade through .7182 will confirm the closing price reversal top. This could trigger the start of a 2 to 3 day break or a 50% correction of the current rally. A trade through .7241 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through .7003.

The minor trend is also up. A trade through .7084 will change the minor trend to down. This will confirm the shift in momentum.

The minor range is .7003 to .7241. Its 50% level at .7122 is the first downside target.

Short-Term Outlook

Although the main trend is up, traders may have decided to take a little off the top on Thursday with the formation of a closing price reversal top.

We’ll be looking for a confirmation of the chart pattern on a trade through .7182. This won’t change the main trend to down, but it could trigger the start of a 2 to 3 correction. A test of the pivot at .7122 could attract new buyers since the main trend is up.

If .7122 fails then look for the selling to possibly extend into .7084. Taking out this level will change the minor trend to down, signaling the selling pressure is getting stronger.

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

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.