NZD/USD selloff might soon hit a floor, as the pair is approaching the .8400 major psychological support level. This is in line with a former resistance level and the 50% Fibonacci retracement.
Stochastic has been indicating oversold conditions for quite some time, suggesting that buyers are ready to jump in anytime soon. A rally from .8400 could last until the broken support area at .8550 or until the previous highs around .8750.
On the other hand, a break below the 50% Fib could still lead to a bounce off the 61.8% Fib. If this fails to hold as support, NZD/USD might make its way back down to the former lows around .8100.
Going long at .8400 with a stop below the 61.8% Fib and a target of .8550 could yield a 2:1 return on risk.
By Kate Curtis from Trader’s Way