Published On: Tue, Mar 7th, 2017

Medium-term reversal completed for NZDJPY

InstaForex

Background


The New Zealand dollar has been on the defensive over the last few days despite there being no economic data to support the move. Later today the fortnightly global dairy trade auction takes place and with extra supply added, prices are expected to fall around 10%. That won’t be a positive for the kiwi given the mood it is in at the moment. There is little else on the calendar until the 2016 Q4 GDP number on March 16. 

USDJPY continues to trade in line with interest rate differentials at the long end of the yield curve, not the short end. This explains why it hasn’t reacted much to the probability of a Federal Open Market Committee rate hike hitting 90%. 

Meanwhile, the Bank of Japan is maintaining its yield-curve-control policy, concentrated on holding the yield on the 10-year JGB at “around zero per cent”. We will get an update on the bank’s thinking on March 16, about 12 hours after the FOMC rate announcement.

Management and risk description


The NZDJPY cross has completed a seven-week Double Top classical charting pattern (refer daily chart below) and while resistance at 80.35/80.60 now caps, yield’s selloff toward the 77.00 level over coming days/weeks.

A bounce to the low 80.00s today would present a worthwhile selling opportunity, with an excellent risk:reward.

Parameters

Entry: today: NZDJPY is seen as a sell on any bounce to 80.05/80.20

Stop: just above 80.60, initially

Target: 50% at 79.08 and 50% at 77.13

Time horizon: allow several weeks at least, for both targets to be met

NZDJPY daily chart (click to expand)

Source: ThomsonReuters  

NZDJPY weekly chart (click to expand)

Source: ThomsonReuters. Create your own charts with SaxoTrader; click here to learn more 

–  Edited by Gayle Bryant

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