Is the Kiwi losing steam in its downward slide, or could we soon witness a renewed push in its long-term decline? Right now, I’m focusing on a classic reversal chart pattern that’s come into play, especially if NZD/JPY approaches its neckline. Let’s dive into what’s happening.
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The Technical Setup: We’ve observed that NZD/JPY has made several unsuccessful attempts to drop below the 85.50-86.00 range, effectively forming a double bottom pattern on the 4-hour chart. At present, the price is inching towards the neckline just beneath the 87.50 minor psychological level. Should it break above this resistance, we might see the completion of the reversal formation. The question remains: Can NZD/JPY maintain its momentum past the neckline?
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Fundamentals at Play: It’s crucial to remember that market movements are usually influenced by fundamental factors. If you haven’t yet delved into the economic backdrop of the New Zealand dollar and Japanese yen, now might be a good time to brush up on the latest economic releases and fundamental news.
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Recent Developments: Earlier this week, the Reserve Bank of New Zealand lowered interest rates by a significant 0.50%, something that was anticipated, but they also left room for further easing. Conversely, in Japan, speculation about rate hikes by the Bank of Japan is on the rise, buoyed by positive growth and trade data.
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Market Sentiment: There’s been a notable improvement in risk appetite, partly due to the progress in the Russia-Ukraine peace negotiations. This development has helped reduce the attractiveness of the safe-haven yen while simultaneously boosting the demand outlook for commodities.
- Indicators and Signals: On the chart, the 100 SMA remains below the 200 SMA, pointing to the possibility that the downward trend could persist rather than reverse. The growing gap between these indicators signals increasing bearish momentum.
Watch out for any long green candlesticks that may break through the double bottom neckline, as these might herald an upward trend of a similar magnitude to the pattern formation. Regardless of which direction you choose to trade, always practice sound risk management strategies and keep an eye on major catalysts that could sway the overall market sentiment!
