NZDJPY has formed lower highs and found support at 74.00, creating a descending triangle pattern on its 4-hour time frame. Price just bounced off the resistance and is now making its way towards support again.
Technical indicators are giving mixed signals, with moving averages hinting at a breakdown and oscillators suggesting a bounce. The 100 SMA is below the 200 SMA, which shows that the path of least resistance is to the downside. A break below support could lead to a drop of around 500 pips, which is roughly the same height as the chart formation.
RSI is already turning higher from the oversold zone which means that sellers are already exhausted and might let buyers take over soon. If support holds, NZDJPY could climb back up towards the resistance around 75.00-75.50. Stochastic is indicating oversold conditions also but hasn’t turned higher.
The RBNZ just cut interest rates last week, weighing on demand for NZD. The recently held Global Dairy Trade auction showed a 2.9% fall in prices, erasing the previous 1.4% gain and showing that the industry is still weak. This could also mean downgrades for milk payout forecasts for farmers and suppliers.
Meanwhile, the BOJ decided to keep monetary policy unchanged for the time being. Data from Japan was mostly better than expected, as industrial production showed a 3.7% rebound while the tertiary industry activity index printed a 1.5% gain.
Up ahead, the New Zealand quarterly GDP reading is due and a weak growth figure could spur more losses for the Kiwi. Analysts are expecting to see a 0.7% expansion for Q4, slightly weaker compared to the previous 0.9% growth reading. A stronger than expected figure, on the other hand, could keep NZDJPY supported.
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