The New Zealand Dollar is edging higher on Friday after posting a sharp loss the previous session. The price action suggests investors believe yesterday’s sell off may have been overdone.
The selling pressure was fueled mostly by profit-taking with the traders worried that a number of interest rate hikes this week by a slew of central banks this week, including the Federal Reserve, the Bank of England and the European Central Bank, would send the global economy into recession.
At 11:26 GMT, the NZD/USD is trading .6363, down 0.0021 or -0.32%.
One reason the NZD/USD is more resilient than the other major currencies is that the Reserve Bank (RBNZ) is still expected to raise interest rates aggressively even as economists predict a recession to hit New Zealand in 2023.
Risk aversion is another factor capping the commodity-linked New Zealand Dollar. U.S. stock markets posted heavy losses on Thursday, spooking investors to buy the U.S. Dollar for protection.
As the greenback rose, it put pressure on dollar-denominated commodities, putting pressure on commodity-lined currencies like the New Zealand Dollar, Australian Dollar and Canadian Dollar.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through .6514 will signal a resumption of the uptrend. A move through .6156 will change the main trend to down.
The minor trend is also up. A trade through .6302 will change the minor trend to down. This will shift momentum to the downside.
The minor range is .6156 to .6514. The NZD/USD is currently straddling its pivot at .6335.
The nearest resistance is a long-term 50% level at .6467. The nearest support is a long-term Fibonacci level at .6231, followed by a short-term 50% level at .6177.
Daily Swing Chart Technical Forecast
Trader reaction to .6335 is likely to determine the direction of the NZD/USD on Friday.
Bullish Scenario
A sustained move over .6335 will indicate the presence of buyers. If this creates enough upside momentum then look for a rally into .6467, followed by .6514.
Bearish Scenario
A sustained move under .6335 will signal the presence of sellers. The first target is the minor bottom at .6302. A trade through this level could shift momentum enough to extend the selling into .6231 to .6178.
Read More:NZD/USD Forex Technical Analysis – Rebounding after Yesterday’s Rout
2022-12-16 11:57:00