New Zealand Dollar Forecast:
- NZD/USD has come under pressure near resistance after surging throughout December
- Will the technical barrier spark a deeper reversal?
- Canadian Dollar Outlook: USD/CAD, NZD/CAD, GBP/CAD 2020 Levels
New Zealand Dollar Forecast: Is NZD/USD Due for a Reversal Lower?
After surging throughout December, NZD/USD has paused at long-term trendline resistance around 0.6745. Trading in overbought territory for the majority of December, it is of little surprise the Kiwi is looking to take a breather now that it has encountered a rather formidable trendline. Originating from mid-2014, the descending trendline has kept price contained ever since and the level conveniently coincides with a nearby Fibonacci level – bolstering the zone’s influence.
NZD/USD Price Chart: Daily Time Frame (December 2018 – January 2020) (Chart 1)
The technical barriers, coupled with a modest retreat in risk appetite, helped spark a NZD/USD pullback that could see the pair extend lower as it looks to consolidate last month’s gains. While it is currently unclear if NZD/USD will continue higher in the longer-term, the release of the FOMC’s December meeting minutes on Friday could dictate the shorter-term direction and compound recent Kiwi weakness.
With that in mind, an initial area of support in the event of a deeper reversal exists around the 0.6580 to 0.6550 area which has spurred price indecision in the past. Given the current spot price, the area could look to provide a base for a subsequent retest of overhead resistance after the pair has consolidated further.
On the other hand, a dovish takeaway from the FOMC’s meeting minutes could see NZD immediately retest resistance, likely sending NZD/USD back into overbought territory. If the combined technical levels fail to keep price contained at the 0.6745-mark, secondary resistance may take shape at the 0.6790 level which coincides with the pair’s swing high in July.
| Change in | Longs | Shorts | OI |
| Daily | 9% | -8% | 3% |
| Weekly | -10% | -19% | -12% |
Still, a move beyond the long-term descending trendline may signal a broader shift in the underlying fundamental landscape and open the door to further NZD/USD gains. In the meantime, however, price action will likely cool until the FOMC minutes are released and the market can run with the implications. For updates on NZD/USD after the minutes are released, follow @PeterHanksFX on Twitter.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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