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NZD/JPY Technical Analysis: Yen Snaps 5-Month NZ Dollar Rise

NZD/JPY Technical Analysis: Yen Snaps 5-Month NZ Dollar Rise

2020-02-04 07:53:00
Ilya Spivak, Head Strategist, APAC
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NZD/JPY TECHNICAL ANALYSIS – Talking POINTS

  • New Zealand Dollar makes good on H&S topping pattern, drops to 70.00
  • Break of trend support from late August suggests downtrend is resuming
  • Long-term trend dynamics hint that a move below 65.00 may be brewing

The New Zealand Dollar turned lower against the Japanese Yen as expected, making good on a Head-and-Shoulders (H&S) topping pattern. Confirmation of the setup on a close below its neckline at 71.73 was followed by a move downward to its implied extension point near the 70.00 figure.

The move violated the series of higher lows set from late August lows, suggesting a nearly five-month recovery has given way a bearish reversal with scope for follow-through. Near-term support is in the 69.69-70.03 inflection zone. A daily close below that is likely to expose the 68.87-69.00 price band next.

Recently broken upward-sloping support from late August has been recast as near-term resistance beginning at 70.87. However, establishing a foothold back above 71.73 is probably a prerequisite for neutralizing immediate selling pressure.

New Zealand Dollar vs Japanese Yen price chart - daily

NZD/JPY daily chart created with TradingView

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Zooming out to the monthly chart, NZD/JPY is seen recoiling from resistance guiding prices lower since late 2014 to produce an ominous-looking Bearish Engulfing candlestick pattern. This suggests the next leg in the long-term downtrend may be about to get underway.

NZD/JPY Technical Analysis: Yen Snaps 5-Month NZ Dollar Rise

NZD/JPY monthly chart created with TradingView

Averaging the depth of prior downswings within the current phase of the structural decline – a move that began in mid-2017 – hints at a 12.2 percent baseline estimate of what an on-coming leg lower might look like. That would put prices at 7-year lows under the 65.00 figure.

NZD/JPY Technical Analysis: Yen Snaps 5-Month NZ Dollar Rise

NZD/JPY monthly chart created with TradingView

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NZD/JPY TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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