After that strong selloff in the past few trading days, NZD/USD is now 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. 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.

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 an opportunity to ride the longer-term downtrend.

By Kate Curtis from Trader’s Way