A Double Top Attempt Spotted in the NZD/JPY

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A Double Top Attempt Spotted in the NZD/JPY

Consolidation:
NZD/JPY started the week trying to push above last week’s high around 88.90. The 1h chart shows that price did crack the 88.90 level, but retreated before breaking above 89.00, bringing NZD/JPY into a consolidation mode to start the week.

As we approach the middle of the 9/22 US session, price action has formed a double top as price cracks the 88.37 low from last Friday.

NZD/JPY 1H Chart 9/22
nzdjpy 1h chart 9/22

(click to enlarge)

Double Top – Bearish Correction:
Let’s first examine the double top scenario, with a bearish outlook in the near-term. We know the prevailing trend is bullish, at least in the 1H chart, so we should limit the bearish outlook. We can see that the 87.97-88.05 area is a support/resistance area, and might provide some support. We can also expect support around the 200-hour simple moving average (SMA) around 87.90. A break below that might signal more than just a short-term bearish correction.

Bullish Continuation:
Now, price is about to meet the 100-hour SMA, and the 1H RSI is right around 40. If the market is still bullish in the short-term, we can expect buyers during the 9/22 – 9/23 sessions. A break back above 88.60, 50-hour SMA, and local resistance pivot, should signal bullish continuation.

Bullish and Bearish Scenarios:
In the daily chart, we can see that the bullish continuation mode has upside risk toward the 89.68-89.92 highs on the year. Also, if price does fall from the double top, it will be a key test of the recent bullish shift. Note that price just came back above the cluster of 200-, 100-, and 50-day SMAs, which brought back the bullish bias. So, if price can hold above that 88.00 area, the market is indeed still bullish. We can give it some elbow space and say that NZD/JPY is bullish even if price falls to 87.50.

However, if price falls below 87.00, we should consider last week’s rally a false bullish break, which signals a bearish outlook, with at leas the 85.73-85.86 lows, and support/pivot area, in sight.

NZD/JPY Daily Chart 9/22
nzdjpy daily chart 9/22

(click to enlarge)

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.