The Strength Meter this week highlighted the New Zealand Dollar losing strength and the Japanese Yen gaining strength. This could see a downtrend form on the pair.
However, what are the key levels and what would the price need to do before confirming the bias?
Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.
In this video, I’m going to go through the trending pair of the week, then we’re going to look at the potential reversal to the trend on NZD/JPY. I’m looking at this particular reversal because of the strength meter we looked at.
The Kiwi is starting to fall, and the JP Yen is starting to bounce from these minus six areas, and it’s moving to the upsides. That could create a potential reversal in the trend: as one currency weakens, one currency strengthens.
We should see a potential trending environment. For NZD/JPY, I’m hoping to see a bit of a downtrend form.
If I go into NZD/JPY, everything’s still trending to the upside. We’ve got the market making higher highs and higher lows. Recently, we saw a lot of weakness come into the market. If I go to that weekly timeframe, we can see a lot of sellers come into the market around this area. What I like about this is that when those sellers did come in the week after, we stayed within that candlestick range. It was a large candlestick range previously, but we’re staying within.
If we go to the daily timeframe, it’s just hovering and it is nicely highlighted on the four-hour within this ranging environment.
Now, we need the JP Yen to strengthen a little bit and the Kiwi to lose some ground. Ideally, what I want to see is a breakout to this range’s downside. We’re dominantly in an uptrend. If we’re expecting Kiwi to weaken and the JP Yen to strengthen, I’d be looking for down trending opportunities. That only comes when the price starts making lower lows and lower highs.
At the moment, we don’t have that. The price is making higher highs, came back into this previous structure high here, and it’s trading sideways now. The reason it’s trading sideways is that both currencies are showing some slight or similar strength and weakness at the moment. We’re getting that sideways price action. No currencies are winning at the moment.
We want to see NZD/USD trade lower as well. We spoke about that in the Forex Market Outlook yesterday. So, a couple of different options you can watch here.
The first one would be to wait for that lower low to form. I’d need to see the price break below this trading range here, come back, retest, and this is where we could look for the potential short opportunity.
Alternatively, you could be a little bit more aggressive by looking to trade from the top of the range, down to the bottom of the range, and then look to either take half your position off and let the rest run or look to add in on continual pullbacks, so break and retest.
What you could look for is for the price to climb into this area, give us a nice false breakout of that point, then look for a short opportunity with your first targets as these lows and then look for a break then retest after that.
The safest one would be waiting for this range to break to the downside, in line with strength and weakness. The strength and weakness of currencies change all the time, so it’s not definite that the price will break to the downside. That’s why you need to put the technical analysis in place as well as a secondary confluence.
What I need to see, as I said, is a breakout and a retest. That would be the most ideal trading point here.
Thanks for watching this video update on NZD/JPY. I’ll speak to you in the next one.
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