NZD/USD Forex Technical Analysis – Long-Term Bullish, but Vulnerable to Short-Term Correction

The New Zealand Dollar is edging lower late Tuesday while posting a relatively tight range as buyers took a breather following a nearly month-long rally that drove the currency to multi-year highs. Bullish traders aren‘t too worried about the current two-day setback as New Zealand’s commodity-pegged economy recovers following its relative success in combating COVID-19.

At 20:23 GMT, the NZD/USD is trading .7038, down 0.0004 or -0.05%.

[fx-primis-ad]

“So far the pullback of the past two days appears to be only a mild correction to an uptrend which remains intact,” Westpac Banking Corp analysts said in a note.

“Global risk sentiment has stalled for now but New Zealand commodity prices continue to rise and the domestic economy remains resilient.”

Given the current upside momentum, the market could reach .7200 by the end of the year. The daily chart indicates there is plenty of room to the upside with no visible resistance coming in at .7395.

[fx-image src=/2020/12/Daily-NZDUSD-1.jpg data-zoom-target=https://responsive.fxempire.com/cdn/n/n/_fxempire_/2020/12/Daily-NZDUSD-1.jpg originalWidth=1920 ratio=1.99]Daily NZD/USDDaily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7104 will signal a resumption of the uptrend. The main trend will change to down on a trade through the nearest main bottom at .6589.

The minor trend is also up. A trade through .6897 will change the minor trend to down. This will also shift momentum to the downside.

The first minor range is .6897 to .7104. Its 50% level at .7000 is the first support. This level stopped the selling on Monday.

The second minor range is .6811 to .7104. Its 50% level at .6957 is the next potential support.

The main range is .6589 to .7104. Its 50% level at .6846 is considered value. A test of this level will likely draw the attention of new buyers.

[fx-article-ad]Short-Term Outlook

The direction of the NZD/USD over the short-term is likely to be determined by trader reaction to the first minor pivot at .7000.

Holding above .7000 will indicate that buyers are still coming in to defend the trend. If this creates enough upside momentum then look for another attempt to extend the rally over .7104.

A failure at .7000 could lead to a test of .6957. Buyers could step in on a test of this level since the main trend is up.

If .6957 fails then look for an acceleration to the downside with .6846 the next likely downside target.

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