Technical Sentiment: Bullish
Key Takeaways
Despite entering bullish territory NZD/JPY remains in a long-term downtrend, thus upside is very limited. Traders should view this temporary correction as a change to sell the pair high when the next bearish signal appears.
Technical Analysis
The New Zealand Dollar is likely to end the 4th consecutive day in the positive against several major counterparts, including USD, EUR and JPY. Out of this lot, NZD/JPY buyers displayed the biggest show of force on Wednesday, when price rallied above a major price pivot line at 85.80 (level also strengthened by 200 Simple Moving Average on 4H timeframe).
With a bullish structure of higher lows and higher highs since 15th October, NZD/JPY could extend gains for a little while in order to complete its correction up to 86.81 (61.8% retracement level from 88.97 down to 83.32). On Daily, 100-Day and 200-Day Simple Moving Averages are slowly declining near 87, almost guaranteeing a bearish bounce if price reaches this level. Stochastic is currently entering overbought territory on Daily, also suggesting upside should be limited in the near future.
Free Reports:
It remains to be seen how NZD/JPY will react post-RBNZ Rate Statement. A slow return below 85.80 will not turn the pair bearish immediately, since HH LH structure and a bullish channel need to be invalidated first. Support lies over 120 pips lower, at 84.60, offering buyers plenty of breathing room to recover, no matter what happens today.
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Prepared by Alex, Currency Strategist at Capital Trust Markets