NZDUSD might be due for a strong bounce, as the pair is testing 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 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.

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.

Going long at market with a wide stop below the channel 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.

By Kate Curtis from Trader’s Way