Trade Recommendation: NZD/JPY
- From 2009 to the end of 2012, NZDJPY found resistance in the 68.50 – 70 range (red portion of horizontal trendlines in Figure 1). In December 2012, NZDJPY moved above the 70 level and continued rallying to reach 85 by April 2013.
- In July 2015, NZDJPY broke the neckline of a large H&S pattern (tops – white ellipses, neckline – yellow trendline). After meeting the downward target obtained from completing the pattern (white vertical line), NZDJPY continued sliding until finally bouncing off the resistance-turned-support level at 70 (green arrow).
Figure 1. NZDJPY Weekly Chart
- Zooming in, NZDJPY recently moved below a well-defined support range (75.50 to 76.10 – blue horizontal trendlines in Figure 2).
- The minor top prior to the most recent decline sits at 76.27 (violet arrow).
Figure 2. NZDJPY Daily Chart
- There are no major supports lying in the 70 – 75 range. If NZDJPY remains below 75.50 (the lower bright blue horizontal trendline in Figure 2), it is expected to continue sliding, potentially reaching 70.
- A move back above the support range (75.50 to 76.10), and subsequently above 76.27 (the minor high – violet arrow in Figure 2) will negate the bearish implications in the short-term.
- Bearish below 75.50
- Neutral with a bearish bias in the 75.50 – 76.27 range.
- A move above 76.30 may shift outlook to bullish.
- Short NZDJPY at current level (74.91 at 17:55 on May 29).
- Target: Half at 73 (short-term target). Half at 70 (longer-term target).
- Stop: Half at 75.70. Half at 76.30 (above minor high).
Featured image courtesy of Shutterstock.