NZD/USD just broke below the .8500 major psychological support level recently, mostly because of the downturn in risk appetite. The recent speech by RBNZ Governor Graeme Wheeler also revealed that the central bank actually secretly intervened in the currency market last month after NZD/USD topped at around .8675.
The RBNZ’s willingness to intervene could keep the Kiwi’s rallies at bay as traders might be more cautious about another potential intervention. Price did pull up to the 61.8% Fib, which is just below the former support at .8500 when New Zealand printed a strong employment report.
On the 1-hour time frame, stochastic has already reached the overbought region, showing that a selloff could follow soon. If the support turned resistance area continues to hold, NZD/USD could test its former lows just below the .8400 handle.
A stop above the .8500 level and a target at .8400 yields a good reward-to-risk ratio for a day trade.
By Kate Curtis from Trader’s Way