The New Zealand Dollar is edging higher late in the session on Friday. The major players are absent because of the Christmas bank holiday so the trade is probably just “bots” versus “bots”. The range remained tight for a fourth straight session following Monday’s plunge and rebound.
Despite the sharp break on Monday, the Kiwi remains just under a 2-1/2 year high hit on December 17 at .7171. The price action following the plunge earlier in the weak suggests the move may have been an aberration. However, it also reaffirms that risk appetite is the main driver of the rally, which started in early November.
On Friday, the NZD/USD settled at .7124, up 0.0016 or +0.22%.
Although the U.S. Dollar showed some life earlier in the week, it is still teetering near a 2-1/2 year low against the New Zealand Dollar, considered to be a barometer of risk sentiment due to its close ties with the global commodities trade.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. It turned down on Monday when sellers took out .7054 and was reaffirmed when .7006 failed as support. The lack of follow-through to the downside, however, and the quick rebound suggest the selling may have been fueled by sell stops rather than new shorting.
The minor range is .7171 to .7003. The close over its 50% level at .7087 suggests traders are trying to establish support at this pivot level.
The main range is .6589 to .7171. If the downtrend continues then its retracement zone at .6880 to .6811 will become the primary downside target area.
The direction of the NZD/USD will continue to be determined by risk sentiment.
If risk is on then buyers should make another run at .7171. Taking out this level could trigger an acceleration to the upside with the April 13, 2018 main top at .7395 the next likely upside target.
There is some uncertainty building because President Trump hasn’t signed the new coronavirus relief deal. If this becomes a major issue then look for investors to start shedding some risk. This could trigger a break under .7087, triggering a potential break into .7003.
If .7003 fails then look for the selling to possibly extend into the short-term retracement zone at .6880 to .6811.