NZD/JPY has been trading sideways recently, but looking at our 4-hour chart, it seems that the pair is trying to form higher lows. NZD/JPY struggled to move below the 72.75 support zone in the past few days and bounced to the upside. If the pair makes a move higher and breaks the 73.40 line, this could potentially confirm an inverse head-and-shoulders formation that could lead to higher levels. For now, until that happens, we will remain cautiously bullish, because the yen-buying could resume at any time.
As mentioned above, a strong break through the 73.40 resistance area, marked by the highs of the 11th, 10th and the 8th of October, could confirm a potential inverse head-and-shoulders pattern that could open the way towards the next resistance at 73.80. This level held the rate from traveling higher on the 5th of October. If this time the bulls prove to be stronger and push NZD/JPY above that level, then we could start examining the 74.10 hurdle, as the next potential target for the pair to reach.
Both of our momentum indicators, the RSI and the MACD, have bottomed and moved higher. The RSI is currently sitting near 50 and pointing higher. The MACD has also shifted from its lows and keeps balancing on an uptrend by pointing to the upside.
Alternatively, a drop below the 72.75 hurdle could confirm that NZD/JPY is still weak and that the upside could be postponed for now. But in order to get comfortable with the downside, we would need to see a break below the 72.30 barrier, marked by the low of the 10th of October. This way, we could start looking at support levels that were last time tested in July 2016. The first good area of support there could be at 71.75, which was the low of the 7th of July 2016. Slightly below that lies another good potential support at the 71.25 level, marked by the low of the 6th of July.
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