The New Zealand dollar hit a more than 3-month low on Friday amid concerns over a new variant of the coronavirus discovered in South Africa. The move was part of the global liquidation that began on October 21 and gained momentum this week after the Reserve Bank of New Zealand (RBNZ) raised rates by just 25 basis points instead of the 50 basis points expected by 40% of the market.

On Friday, the NZD / USD stood at 0.6821, down 0.0036 or -0.52%.

Anyone can guess how the New Zealand government and the RBNZ will react to the announcement of the new variant. Most countries have responded with a halt in travel from countries of origin of the virus, with more movements likely to follow as the variant is tracked nationally. In addition, scientists expect to know within two weeks whether the variant is resistant to the vaccine. If so, expect the government and the RBNZ to take more aggressive action, which could increase downward pressure on the NZD / USD.

NZD / USD daily

Technical analysis of the daily swing chart

The main trend is downward according to the daily swing chart. A trade through last week’s low at .6805 will signal a resumption of the bearish trend.

The new minor range is 0.7053 to 0.6805. Its 50% level at 0.6929 is new resistance.

Short term outlook

The fundamentals are bearish and the trend is down. We don’t expect to see a trend change, but there is room for a short-term return to the minor pivot at 0.6929. Since the trend is down, short sellers are likely to defend this level.

On the downside, the market hit the major August 20 low at 0.6806 before stopping at 0.6805.

This suggests that the new bears were unwilling to sell weakness. This increases the chances of a countertrend rally and a new short sell opportunity.

If the sellers regroup enough to push the NZD / USD to 0.6805 with significant volume, then look lower. The daily chart indicates that there is no major support until the main floor on November 2, 2020 at 0.6589.


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Al Worden

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