The New Zealand Dollar surged to the upside on Wednesday, putting in a potentially bullish closing price reversal bottom in the process. The catalysts behind the price surge were dovish remarks from U.S. Federal Reserve Chairman Jerome Powell, which put a steep U.S. rate cut back on the table.
In his testimony before the U.S. House Financial Services Committee, Powell signaled the possibility of a 50-basis point rate cut in late July when said that “uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.” Powell also highlighted that low inflation in the U.S. could be even more “persistent than we currently anticipate.” Previously, he had said that muted inflation was “transitory”.
At 04:01 GMT, the NZD/USD is trading .6667, up 0.0023 or +0.35%.
Kiwi shorts were forced out of their positions and longs made adjustments to their positions because Powell’s dovishness came as a surprise after his comments on June 25 dampened the chances of a half-point rate cut.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart, however, Wednesday’s closing price reversal bottom and today’s confirmation of the chart pattern shifted momentum to the upside.
A trade through .6583 will negate the closing price reversal bottom and signal a resumption of the downtrend.
The main trend will change to up on a move through the swing tops at .6720 and .6727.
The short-term range is .6487 to .6727. Its retracement zone at .6607 to .6579 is support. This zone stopped the selling on Wednesday at .6583.
The intermediate range is .6784 to .6481. Its retracement zone at .6633 to .6669 is currently being tested. Taking out this zone will put the NZD/USD in a position to challenge the main retracement zone at .6710 to .6764. This zone stopped the rally recently at .6720 and .6727.
Daily Swing Chart Technical Forecast
Based on the early price action, the direction of the NZD/USD on Thursday is likely to be determined by trader reaction to the intermediate Fibonacci level at .6669.
A sustained move over .6669 will indicate the presence of buyers. If this move creates enough upside momentum then look for a potential surge into the main 50% level at .6710, followed by a pair of main tops at .6720 and .6727.
A sustained move under .6669 will signal the return of sellers. This could trigger a labored break into a pair of 50% levels at .6633 and .6607.
Look for an acceleration to the downside if the short-term Fibonacci level at .6579 fails as support.