After that strong selloff in the past few trading days, NZD/USD is now giving a buy forex signal as it is finding support at the .8550 minor psychological level. This has acted as a floor for price drops in the past and might hold again.
Stochastic just moved out of the oversold region and is indicating buying momentum for a forex signal. This suggests that further gains could be in the cards for NZD/USD, at least until the next resistance area at .8650. Stronger rallies for the pair could take it up to the previous highs near the .8750 minor psychological level.
NZD/USD Forex Signal
Going long at the current level until the .8650 to .8750 resistance zones could work for a countertrend or range play, with a tight 50-pip stop loss potentially yielding at least a 2:1 return on risk. Adjusting the stop to entry once price tests .8650 could protect profits and yield a risk-free trade. Switching to a short bias on a strong break of .8550 could be a forex signal to ride the longer-term downtrend.
Bear in mind that the RBNZ is one of the more hawkish major central banks as it has hiked interest rates recently, offering a positive interest rate differential on a long NZD/USD position. Meanwhile, the FOMC is still staying on track with its taper program and is looking at strategies for a gradual exit from their easing program.
Risk sentiment might lend more support to the US dollar though, as rising geopolitical tension could keep the safe-haven dollar with a buy forex signal. Any gains in NZD/USD might be limited to the nearby resistance areas, as this could be an opportunity to hop in the longer-term decline of the forex pair as well.
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