NZD/USD Forex Technical Analysis – Testing Long-Term Fibonacci Level at .6231

The New Zealand Dollar touched a fresh two-year low on Thursday as worries about Chinas slowing economy weighted on Asian stocks, while a survey on New Zealand inflation expectations was more restrained than rate hawks wagered on.

Wednesday‘s U.S. Consumer Price Index (CPI) data did nothing to change the bearish tone either. Although the report showed the pace of inflation had slowed, it probably isn’t enough to prevent the U.S. Federal Reserve from raising its benchmark rate at least 50-basis-points in June and July. This is a much faster pace than the Reserve Bank of New Zealand (RBNZ).

RBNZ Longer-Term Inflation Expectations Stabilize, Lowering Rate Hike Expectations

Sellers returned to the NZD/USD on Thursday, followed the release of a RBNZ survey showing longer-term inflation expectations had stabilized after four quarters of sharp increases.

According to the RBNZ survey, the outlook for two years ahead steadied at 3.29% and the five-year outlook edged up only slightly to 2.42%, which central bank policymakers said was close to or in line with its 1-3% target range.

Prior to the release of the report, traders were pricing in larger rate hikes and domestic interest rates were holding near their highest level since 2015.

After the release of the survey, investors quickly trimmed wagers on a half-point rate hike from the RBNZ at its May 25 policy meeting – though it is still seen as more likely than not. The news also fueled a sharp drop in two-year swap rates to 3.63%, from a recent seven-year peak of 3.98%.

Daily Swing Chart Technical Analysis

The main trend is down according

to the daily swing chart. A trade through the intraday low at .6237 will signal a resumption of the downtrend. A trade through .6569 will change the main trend to up.

The minor range is also down. A trade through .6380 will change the minor trend to up. This will shift momentum to the upside.

The long-term trading range is .5469 to .7465. The NZD/USD is currently trading inside its retracement zone at .6467 to .6231. This zone has to hold as support or the Forex pair could collapse.

The first minor range is .6380 to .6237. Its pivot at .6309 is the nearest resistance. The second minor range is .6569 to .6237. Its 50% level at .6403 is another potential resistance area. This followed by the long-term 50% level at .6467.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Thursday is likely to be determined by trader reaction to .6295.

Bearish Scenario

A sustained move under .6295 will indicate the presence of sellers. The next downside target is the long-term Fibonacci level at .6231. This is a potential trigger point for an acceleration to the downside with the next major target the May 15, 2020 main bottom at .5921.

Bullish Scenario

A sustained move over .6295 will signal the return of buyers. The first target is the minor pivot at .6309.

Sellers could come in on the first test of .6309, but overtaking this level could trigger a short-term spike into the minor top at .6380, followed by another minor pivot at .6403.