NZDJPY tumbled by roughly 300 pips following the RBNZ’s decision to cut interest rates by 0.25% this week. From there, price consolidated in a bearish flag pattern, which is usually a continuation signal.
A break below the tight consolidation could lead to another 300-pip decline for the pair, taking price down to 83.50. Stochastic is moving up from the oversold area though, suggesting that Kiwi sellers are still garnering steam.
The short-term 100 SMA is below the 200 SMA on the 15-min time frame, confirming that further selling pressure could be seen. However, if an upside break from the consolidation takes place, price could move up to the next resistance at 88.50.
NZDJPY Fundamental Factors
There are no other event risks for this trade setup for the rest of the day but the recent ones could continue to keep the pair weak. RBNZ Governor Wheeler emphasized that they could implement further easing measures if commodity prices continue to weaken and if the dairy sector fails to rebound. He also mentioned that further declines in the Kiwi’s exchange rate would be desirable, as this would support export activity and domestic price levels.
As for the yen, Japan printed a weaker than expected BSI manufacturing index in today’s Asian session, keeping the currency’s gains limited. Prior to this though, BOJ Governor Kuroda noted that the yen is already significantly weak and that it was able to correct the gains made over the past three years. This suggests that the BOJ is no longer looking to implement additional measures to keep the yen weak.
Zooming out to longer-term time frames reveals that the next support area is at 84.00 then at 81.00. It could take some time before the pair reaches those levels but the path of least resistance is still to the downside for the time being.
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