NZDUSD could be in for a correction after breaking below the support zone at the .7800 major psychological level. 

The pair has dipped to the .7700 area and has shown signs of retracing.

The Fibonacci retracement tool indicates that the 38.2% level lines up with the area of interest at .7800, which could hold as resistance for now. Stochastic is moving up, which means that price could head back to the .7800 area for now.

At the same time, the 100 SMA and 200 SMA are around the 50% Fib, which might also hold as resistance. MACD is moving up, reflecting how buyers are in control of price action for now. Once sellers jump back in, price could head back to its previous lows at .7700 or perhaps make new ones.

Event risks for this trade setup include the dairy auction in New Zealand and the release of the quarterly jobs report on Wednesday and Thursday respectively. Strong figures could pave the way for a sharper correction, possibly until the 61.8% Fib level.

Shorting at .7800 with a stop at .7900 and a target of .7700 could yield a 1:1 return on risk. The US non-farm payrolls report is due on Friday and this might lead to another dollar if the actual data comes in strong.

By Kate Curtis from Trader’s Way