NZD/USD Forex Technical Analysis – Needs to Close Over .7115 to Sustain Upside Momentum

The New Zealand Dollar is testing another multi-month high after a report showed New Zealands economy grew a record 14% in the third quarter, bouncing back from a COVID-19 lockdown earlier in the year that shut businesses and brought activity to a standstill, official data showed on Thursday.

Annual gross domestic product (GDP) rose 0.4%, Statistics New Zealand said, with both figures beating expectations in a Reuters poll for quarterly growth of 13.5% and an annual contraction of 1.3%.

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At 02:52 GMT, the NZD/USD is trading .7128, up 0.0013 or +0.19%.

The Kiwi is also being supported by the Federal Reserves latest pledge to support the economy and the apparent progress in U.S. fiscal stimulus negotiations.

[fx-image src=/2020/12/Daily-NZDUSD-6.jpg data-zoom-target=https://responsive.fxempire.com/cdn/n/n/_fxempire_/2020/12/Daily-NZDUSD-6.jpg originalWidth=1920 ratio=1.99]Daily NZD/USDDaily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier today when buyers took out the previous days high. A trade through .7054 will change the main trend to down.

[fx-article-ad]Daily Swing Chart Technical Forecast

Due to the prolonged move up in terms of price and time, the direction of the NZD/USD on Thursday is likely to be determined by trader reaction to .7115.

Bullish Scenario

A sustained move over .7115 will indicate the presence of buyers. This would keep the NZD/USD on a path to eventually test the April 13, 2018 main top at .7395.

The fundamentals are bullish across the board so the only worry for bulls is probably an overbought market. Additionally, the Reserve Bank of New Zealand policymakers could start to express concerns over the value of the Kiwi. That takes us to the bearish scenario.

Bearish Scenario

A sustained move under .7115 will signal the presence of sellers. If this move generate enough downside momentum then look for a test of .7054. Breaking this level will change the main trend to down.

A close under .7115 will produce a potentially bearish closing price reversal top. If confirmed this could lead to a 2 to 3 day correction, a change in trend or a 50% to 61.8% correction of its November to December rally.

For a look at all of todays economic events, check out our economic calendar.