NZDUSD might be due for a strong bounce, as the pair is testing the forex support at the bottom of the ascending trend channel on its daily time frame. Trade balance from New Zealand came in better than expected as it showed a smaller deficit and a considerable recovery in exports.
A bounce from the current forex support levels could take NZDUSD back to the top of the channel eventually, and this lines up with the .8900 major psychological level. Stochastic is climbing out of the oversold region anyway, indicating that buying pressure could return.
Forex Support Bounce
A weak rally might last only until the mid-channel area of interest near the .8300 major psychological handle. Bear in mind though that the pair just sold off sharply after breaking below the neckline of the double top formation, indicating that the downtrend might carry on beyond the forex support area.
Going long at market with a wide stop below the channel forex support or the .8000 handle could yield a high return on risk if one aims for the top of the channel. Trailing the stop could be a good way to minimize exposure and lock in gains.
Data from the US has been mostly stronger than expected though, upping the odds of a potential break below the forex support near .8000. Bear in mind that the Fed is already drafting its exit strategy, although Yellen has refused to disclose when they plan to hike interest rates. More signs that the Fed could move closer to tightening monetary policy could spur stronger demand for the US dollar later on.
At the same time, the risk-off environment sparked by the US airstrikes on ISIS in Syria could lead to a forex support breakdown, as this favors the lower-yielding US dollar, which usually acts as a safe-haven currency.
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