NZD/USD Forex Technical Analysis – Trader Reaction to .5958 and .6074 Determines Next Major Move

The New Zealand Dollar is edging lower on Tuesday after Westpac said that negative interest rates would be a natural next step for New Zealand’s central bank as it responds to the economic fallout of the coronavirus crisis.

The lender said in a note that the Reserve Bank of New Zealand (RBNZ) would lower the official cash rate (OCR) by 75 basis points to -0.50% in November this year.

“We expect that the RBNZ will signal either its intent or its willingness to move to a negative OCR at the August monetary policy statement,” Chief Economist Dominick Stephens said in a note.

At 07:02 GMT, the NZD/USD is trading .6008, down 0.0039 or -0.63%.

Daily NZD/USD           

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6092 will change the main trend to up. A move through .5911 will signal a resumption of the downtrend.

The minor trend is also down. A trade through the new minor top at .6076 will change the minor trend to up. This will also shift momentum to the upside.

The main range is .6448 to .5469. Its retracement zone at .5958 to .6074 is currently being tested. Based on the price action the last month-and-a-half, it’s safe to say that the near-term direction of the Forex pair is being controlled by this retracement area.

Daily Swing Chart Technical Forecast

Look for a sideways to lower trade if the NZD/USD remains inside the .5958 to .6074 retracement area. This type of formation usually suggests that traders are waiting for news and therefore, indecisive. The news that drives the next wave of volatility could be Trade Balance data, Fed decisions on Wednesday or ECB moves on Thursday.

Bullish Scenario

A sustained move over the upper or Fibonacci level at .6074 will indicate the presence of buyers. This move could create the upside momentum needed to take out the minor top at .6076, and the main tops at .6092 and .6131.

Bearish Scenario

A sustained move under the lower or 50% level at .5958 will signal the presence of sellers. This could trigger a quick break into the minor bottom at .5911. This is a potential trigger point for an even steeper break into another main bottom at .5844 and a short-term 50% level at .5800.

Side Notes

The current chart pattern indicates investor indecision and impending volatility. Traders are looking for a catalysts that could lead to a surge in volume. Breakouts above .6074 and below .5958 could fail if the volume is below average. In that case, traders would get whipsawed.

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.