NZD/USD bulls might have a chance to catch the pair’s uptrend as it made a selloff on its 4-hour chart, which technical analysis experts claim to be a correction. The pair is currently testing the rising trend line on the same time frame and this coincides with the .8600 major psychological support level.
Traders have been buying up the New Zealand dollar recently, thanks to the latest rate hike by the Reserve Bank of New Zealand and strong economic data from the country. In addition, the positive carry from holding long positions open for days is also an attractive reason to buy the currency pair.
Technical Analysis for NZD/USD
When the pair tested the .8700 major psychological resistance in today’s Asian trading session though, a reversal candlestick caught the attention of several technical analysis traders and led them to book profits right away. This sparked a sudden selloff for the pair, as other traders also locked in gains when they saw NZD/USD retreat.
However, the uptrend might still resume as stochastic is already indicating oversold conditions and there have been candles showing hesitation around the trend line. This could depend on the outcome of the US ADP non-farm employment change release though, as a strong figure might renew demand for the US dollar.
Recall that Fed Chairperson Yellen recently stated that the US labor market is still weak and that it could still use some support from easy monetary policy. A weak ADP reading could be a prelude for a poor NFP figure, which might force the Fed to rethink its taper plan. If that’s the case, the US dollar might suffer a sharp selloff and push NZD/USD back up on its uptrend.
Waiting for the actual release of the top-tier report is a more prudent trading decision even though the NZD/USD technical analysis signals line up for a long trade already. The odds are better when fundamentals line up with the technical bias after all.
To contact the reporter of the story: Marco Roemer at marco@forexminute