NZDUSD steps lower in 2021 despite rate hikes, but finds technical support at the lows

NZDUSD

NZDUSD on the weekly chart

The NZDUSD stepped lower in 2021 in choppy up and down trading. The moves to the downside came despite rate hikes by the Reserve Bank of New Zealand toward the later half of the year. The expectations are the central bank will look to continue that trend in 2022.

Overall, the high for the year reached 0.74642, during the week of February 21. That high stalled within a high extreme swing area ahead of the 2017 high. That swing area came between 0.74367 and 0.74847. Those highs encompassed swing highs from September 4, 2016, September 17, 2017, January 21, 2018 and February 11, 2018.

The price has not returned to that area until this year’s run higher to start the year. Sellers did lean against the level, however, and quickly reversed the market – never to threaten the area again in 2021. That level will likely at some point be retest again (sometime), but when it does, it will have another peak that will add to the levels importance (file that level away as an important upside target someday).

From that selling high, the price action moved generally lower for the remainder of the calendar year.

On the way lower, the first major swing low toward the end of March tested a swing area between 0.69405 to 0.69699 (see green numbered circles). That area corresponded with the swing highs from the end of 2018, and beginning of 2019, but was broken toward the end of 2020. The revisit and hold on the first test made sense.

The next major low in August, extended to another swing level/area near 0.6800 area (0.6804 – see blue numbered circles). The price bounced off that level as well as dip buyers leaned on the dip into support once again.

That helped to define a lower trend line which was tested on the final low for the year in December 2021. On the way lower the price action traded above and below the 100 and 200 week MAs (blue and green lines) over a four week period. There was some stall near those longer term MA levels.

At the low for the year in December (at 0.67007), the price not only tested the trend line but also the 38.2% retracement target of the move up from the 2020 low at 0.67012. Buyers leaned once again, and have been able to push the price back higher into the end of year.

What will guide the bias going into 2022?

On the move back higher, the 200 (green line in the chart above) and the 100 week MAs (blue line) was rebroken. The higher 100 week MA has done a good job of holding as support in the final week of the year. Bullish tilt.

As a result, those MAs will be the early barometers for either a bullish or bearish bias.

Remember, despite the chop lower in 2021, the pair was only able to correct to the longer moving averages, a lower trend line, and the 1st major retracement level at the 38.2% retracement. There were four weeks where the price tested that area, and two weeks where lows hit the 38.2% lower extreme target, but support held, and the price bounced.

As a result, the 2021 year was a correction year into MA and initial retracement support.

Now if the MAs can be rebroken in 2022, the bias will shift more to the downside with the breaking of the 38.2% at 0.67012 as the next key target to get to and through.

Moving below those levels and the technical bearish view gets stronger. There should be further probing with the 50% and swing area around that retracement level between 0.6421 to 0.6488 as the next key targets.

Conversely, if the MAs hold support (the current price is at 0.6833 above the 100 week MA at 0.67898 and 200 week MA at 0.67412), the corrective bottom that took around 8-9 months to reach, may be in.

Start taking swing levels/areas from 2021 at:

  • 0.6880
  • 0.69405 to 0.6970,
  • 0.7169 to 0.72163
  • 0.73157 and back up to that ceiling ahead of the high at
  • 0.74367 to 0.74847

would be the roadmap to the upside off the weekly chart.

Taking a look at the daily chart below, the

  • 100 day MA at 0.69652 is near the swing area on the weekly chart between 0.6940 and 0.6970.
  • The 200 day MA at 0.70289, and
  • 50% of the years trading range at 0.70825

would be other targets that if broken, would give the buyers more confidence from a technical perspective.

NZDUSD

NZDUSD on the daily chart

SUMMARY: Was 2021 a corrective year into key support, or the start of something bigger to the downside? A move below the 100/200 week MAs and the 38.2% retracement would be supportive of more downside to come in 2022. Absent that, and the technical picture going into 2022 is that 2021 was the dip to buy. The good news is the levels are set. The risk can be defined and limited.

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