NZDUSD is testing the bottom of the forex range forming on its 1-hour time frame, as price is finding a floor at the .7780 area once more. A bounce off this support zone could lead to a test of the top of the range at the .7915 level.
Stochastic is moving out of the oversold area, indicating that a rally is possible and that losses might be kept in check. A weak rally might last only until the middle of the forex range, right around the area of interest around the .7850 minor psychological level.
Forex Range Outlook
A downside break is still possible though, as the recent drop has been sharp. This was spurred by a weaker than expected New Zealand dairy auction, which marked another decline in dairy prices and led to speculations of another cut in Fonterra milk payouts. A move lower could lead to as much as 140 pips in losses, which is roughly the same height as the forex range chart pattern.
There have been no reports released from the US economy recently, with only a few FOMC officials giving testimonies but barely providing strong hints on what the Fed plans to do next. The next major catalyst for this forex range trade might be the NFP release on Friday, which could indicate a strong jobs gain of 231K, higher than the previous 214K increase.
With that, the path of least resistance is to the downside, unless the US reports turn out to be huge disappointments. Leading indicators such as the ISM PMI readings and the ADP non-farm employment change might also spur action for this NZDUSD pair.
Risk appetite might also play a key role in determining whether the forex range would hold or not, as geopolitical tension continues to weigh on the higher-yielding currencies and favor the safe-havens such as the US dollar.
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