NZD/USD Shallow Bullish Divergence (May 28, 2014)

NZD/USD might be due for a bounce this week, as the US gears up to release a downward revision in its Q1 GDP reading. The figure was initially reported at 0.1% but analysts predict that the second version could show a downgrade to -0.6%, effectively showing an economic contraction for the period.

This could trigger a rally for NZD/USD back to the previous highs around the .8700 levels. Stochastic is showing a shallow bullish divergence, as the oscillator made higher lows while price made lower lows.

On the other hand, a break could lead to a sharper selloff if the GDP reading comes in strong. There are no reports due from New Zealand this week but data from the economy has been relatively strong.

Going long at the current levels and aiming for .8700 with a 50-pip stop could yield at least a 3:1 return on risk.

By Kate Curtis from Trader’s Way