Trade Recommendation: Short NZD/JPY
The New Zealand Dollar/Japanese Yen pair (NZD/JPY) started its downtrend in June 2015 when it broke below support of 83.60. This activated the head and shoulders reversal pattern on the weekly chart. The breakout started a waterfall event that saw the pair plummet to as low as 69.211 in June 2016. In one year, the New Zealand Dollar lost over 17% of its value against the Japanese Yen.
With a bottom in place, NZD/JPY began to rally. It went as high as 83.806 in January 2017. Bears, however, defended the resistance and sent the market down to 75.80 support in April 2017. Bulls managed to defend the support and this inspired another rally to resistance of 83.80 in July 2017. Unfortunately for buyers at this level, bears are still in control of the market.
Technical analysis reveal that the New Zealand Dollar/Japanese Yen is taking out support of 75.80. This would trigger the large double top continuation pattern on the weekly chart. The bearish view is supported by four consecutive lower highs on the weekly chart. While 75.80 still holds, the pressure from the lower highs will most likely breach the support.
The strategy is to short the market once the pair takes out support of 75.80. A breakout would likely inspire a selling frenzy that would take the market to our target of 68.
The process may take more than three months.
Weekly Chart of New Zealand Dollar/Japanese Yen on OANDA
As of this writing, the New Zealand Dollar/Japanese Yen pair (NZD/JPY) is trading at 75.703 on OANDA.
Summary of Strategy
Buy: Short as close to 75.80 as possible.
Stop: Move above 77.
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