By: Mike Kulej
So far this year, the New Zealand Dollar-Japanese Yen pair has not presented many trading opportunities. The first two weeks of January brought a slow, choppy uptrend, at least as seen on the intermediate term chart.
The situation changed to a degree last week, when the NZD-JPY sold off, falling from 64.00 to 62.59. On Monday, the price rebounded to 63.25 and in the process formed a possible Head and Shoulders reversal pattern.
We can see the Left Shoulder at 63.43, followed by the Head at 64.00. The possible Right Shoulder is not formed yet. It could materialize around 63.45, in which case the H&S would be symmetrical. Of course, the pattern does not have to be like that, but the symmetry makes it easier to identify and act on.
The H&S will not be confirmed until the price moves below the Neck Line - the line connecting the two lows between shoulders. If it is broken, the NZD-JPY could move substantially lower, perhaps test the next support 61.70 or even break it. Chances are, we will not have to wait very long to find out.