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NZD/USD Break and Retest Setup (May 7, 2014)
NZD/USD made a strong upside break from the top of its range, which is around the .8700 major psychological resistance. This level could act as support moving forward, as it is close to the 38.2% Fibonacci retracement level.
Stochastic is moving out of the overbought zone, indicating increased selling pressure in the near term. This could lead to a deeper retracement, possibly until the 50% Fib level, which is in line with the .8550 minor psychological support.
Waiting for stochastic to reach the oversold area before taking a long position could be a prudent move, as bulls wait for a better price to reestablish their buy orders. Going long at .8550 with a stop below the 61.8% Fib and a target above the previous highs could yield a good return on risk.
By Kate Curtis from Trader's Way
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