- The NZD/JPY dollar initially rallied during the trading session on Wednesday, showing bullish pressure again against the Japanese yen.
- However, we continue to see the area right around ¥87 offer resistance, and by the end of the day, we started seeing selling pressure.
- There are a lot of different ways to look at this currency pair right now, so it’s worth paying close attention to the next couple of candlesticks.
The shape of the candlestick is a shooting star, and then of course will attract a lot of attention. Furthermore, the previous candlestick looks the same, and that suggests that we are continuing to see the area above cause problems. If we break down from here, then it’s likely that we could see this market go down to the 50-Day EMA, which sits just below the ¥86 level.
Choppiness Ahead
Ultimately, I think you are going to continue to see a lot of choppy behavior, and with that being the case is likely that we will see a lot of back-and-forth and stagnation at the moment. You could also suggest that we are looking at an ascending triangle, so we do get a breakout to the upside, it’s likely that we could go much higher. However, it does not look like we are ready to do so yet. That being said, if we were to break out to the upside, that would slice through at least 2 shooting star candlesticks over the last 48 hours, you could even make an argument that the money candlestick was something similar to a shooting star. That would obviously be a very bullish sign, just as breaking down below the 50-Day EMA could send this market much lower.
The ¥85 level underneath should be supported. At this point, the market would then start to ask questions again. Anything below ¥85 would have me looking at this through the prism of a trend change. This would also be a major “risk off scenario”, as the New Zealand dollar is considered to be a “risky currency”, as it is a commodity currency and of course is highly levered to Asia itself. If interest rates drop, that favors the Japanese yen mainly due to the fact that the Bank of Japan won’t have to do as much printing to buy all those JGB 10-year bonds.
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