NZD/USD Forex Technical Analysis – Overbalancing Time Will Be First Sign of Weakness

A second day of profit-taking drove the New Zealand Dollar lower on Friday as investors continued to speculate on when the U.S. Federal Reserve might taper its asset buying. The Kiwi still managed to close up 0.75% for the week.

Dealers said speculators pared some short positions in the U.S. Dollar on speculation the Fed would not now increase its bond buying program, given the rollout of coronavirus vaccines had improved the economic outlook for later in the year.

On Friday, the NZD/USD settled at .7238, down 0.0020 or -0.28%.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7316 will reaffirm the uptrend. Taking out .7153 changes the main trend to down.

The minor range is .7153 to .7316. Its 50% level at .7234 is currently being tested.

The short-term range is .7003 to .7316. Its 50% level at .7159 forms a support cluster with the main bottom at .7153. If this area fails as support then look for a potential acceleration to the downside.

Short-Term Outlook

At first glance, the pivot at .7234 is the level to watch on Monday. Trader reaction to this level is likely to set the tone for the session.

A sustained move over this level could generate enough upside momentum to challenge last week’s high at .7316, but in order to get there, Treasury yields are going to have to come down.

A sustained move under .7234 will signal the presence of sellers. This could create the momentum needed to drive the NZD/USD into .7159 to .7153.

If .7153 fails to hold then prepare for an acceleration to the downside with .7084 the next likely target later next week.

Time has also become a factor. The last four breaks have lasted two trading sessions. If we get a lower low on Monday then this will be the third session down from the recent top. This will be the first sign of weakness because time is overbalancing. We may or may not get a steep plunge on this move, but the chart pattern will be a warning that the selling is getting stronger or the buying weaker at current price levels.

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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.