NZD/JPY Consolidates At The Lows But (Surely) Can't Stay Boxed In Forever

NZD/JPY has had a rough couple of months, shedding nearly -7% from its March high. Now within a consolidation phase, we’re on the lookout for a breakout, one way or another.

NZD/JPY has had a rough couple of months, shedding nearly -7% from its March high. Now within a consolidation phase, we’re on the lookout for a breakout, one way or another.

We can see on the daily chart the trend is clearly bearish with its strong momentum, lower lows and shallow pullbacks. Yet given the extended nature of the move, it’s plausible it could be due a correction. Prices are currently coiling having printed a series of small bullish hammers above so there is a hesitancy to move lower, at least over the near-term. Yet with the series of lows between August and October providing resistance, price action is essentially boxed in between 71.50-72.30.

For now, we’re monitoring the consolidation phase, as a return of momentum could signal its next directional move.

  • If prices continue to consolidate below 72.50 and pullback towards the averages a little more, we’d be more comfortable with a short position.
  • However, if prices remain above 71.50 and break 72.50 with conviction, we could see NZD/JPY headed higher as it heads for the gap around 73.47/64

Drivers for upside potential:

  • RBNZ shifted to neutral at their last meeting, so improving economic data could provide a tailwind for a heavily sold currency.
  • If trade tensions are to thaw, demand the JPY would likely reverse course and send NZD/JPY and AUD/JPY markedly higher.
  • A combination of the two would make any upside the more aggressive.

Drivers for downside potential:

  • Trade tensions increase and/or we see a further downside pressure on global equities, which places the globe back into risk-off mode to send NZD/JPY and AUD/JPY lower.
  • Domestic data continues to weaken, particularly inputs for growth and inflation or employment.

That said, data specifically for New Zealand remains on the quiet side for the foreseeable future. So, without new developments for trade could continue to see NZD/JPY trade in a range for a whilst long. But if we do see momentum return which is backed up by a key driver, then we’d expect a solid break of compression.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account