NZD/USD Retracement to Former Support (May 14, 2013)

This was followed by the Fed’s release of their plans to exit monetary policy easing by gradually reducing their bond purchases, triggering a sharp dollar rally.

The drop has taken NZD/USD below the .8400 major psychological level, which has acted as strong support in the past. A potential retracement might still take place this week if New Zealand data provides enough support for the Kiwi.

Earlier today, the New Zealand quarterly retail sales report came in slightly weaker than expected, with the headline figure posting a 0.5% increase instead of the estimated 0.9% rise and the core figure showing a mere 0.6% uptick, lower than the previous 1.2% increase.

If NZD/USD’s rally does have legs or if a major correction will take place, the pair could find resistance at the 38.2% Fib, which is in line with previous support level. A stop above the .8400 mark would yield a good reward-to-risk ratio if the target is around the previous lows near .8250.

By Kate Curtis from Trader's Way