The New Zealand Dollar finished higher on Friday, posting its sixth consecutive gain in the process. Traders haven’t turned bullish on the Kiwi, but they may have overdone it on the short side after posting six consecutive losing weeks. Traders still believe the Reserve Bank of New Zealand will cut rates again before the end of the year, but they don’t see an opportunity pressing prices lower at current levels. Hence, the short-covering and profit-taking rally.
On Friday, the NZD/USD settled at .6428, up 0.0053 or +0.83%.
Helping to fuel last week rally was improving global sentiment, after the United States and China agreed to high-level trade negotiations early next month, and a significant unwinding of safe-haven assets. The Kiwi received its initial boost last week after the U.S. reported a contraction in the manufacturing sector.
Daily Technical Analysis
The main trend is down according to the daily swing chart, but momentum has been trending higher since the formation of the closing price reversal bottom at .6269 on September 3 and its subsequent confirmation.
The main trend will change to up on a trade through .6791. This is highly unlikely, but there is room to complete a normal 50% to 61.8% correction before the short-sellers re-emerge. A trade through .6269 will negate the closing price reversal bottom and signal a resumption of the downtrend.
The minor trend is also down. A trade through .6588 will change the minor trend to up. This will also reaffirm the shift in momentum to the upside.
The minor range is .6588 to .6269. Its retracement zone at .6429 to .6466 is the first target. This zone was tested on Friday.
The main range is .6791 to .6269. If the minor trend changes to up then its retracement zone at .6530 to .6592 will become the next upside target.
Since the main trend is down, look for sellers to show up following tests of these areas.
Daily Technical Forecast
The direction of the NZD/USD on Monday is likely to be determined by trader reaction to the price cluster at .6428 to .6431.
A sustained move over .6431 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to extend into the short-term Fibonacci level at .6466.
The Fib level at .6466 is a potential trigger point for an acceleration to the upside with the next major target the main 50% level at .6530. Look for sellers on the first test of this level.
A sustained move under .6428 will signal the presence of sellers. This could trigger an acceleration to the downside with the next target angle coming in at .6349. Aggressive counter-trend buyers could come in on a test of this angle. They will be trying to establish a secondary higher bottom.
This article was originally posted on FX Empire
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