NZDJPY recently formed a double bottom pattern, signaling that price is done with its selloff. Price recently broke past the neckline around the the 74.00 major psychological handle, confirming that further gains are in the cards.
The chart pattern is approximately 200 pips tall so the resulting rally could be of the same size, taking the pair up to the 76.00 handle next. However, the 100 SMA is below the 200 SMA so the path of least resistance might still be to the downside. The gap between the moving averages is narrowing so an upward crossover might be possible.
RSI is already in the overbought zone, which suggests that buying pressure could fade soon and lead to a return in bearish momentum. Similarly stochastic is also in the overbought zone and a move lower could also yield a decline for NZDJPY.
New Zealand reported a decline in its ANZ business confidence index from 16.0 to 15.5, hinting at slower activity down the line. However, RBNZ head Graeme Wheeler just recently mentioned that he doesn’t favor rapid easing, which suggests that the New Zealand might keep interest rates on hold for the next few months.
In contrast, BOJ Governor Kuroda has been vocal about his easing bias during his speech in the Jackson Hole Symposium. He hinted that the Japanese central bank could ramp up stimulus during their September meeting and that it was simply a matter of which policy tool to use. Another BOJ board member confirmed this easing bias in saying that additional support is needed to spur stronger spending and inflation.
Japan reported a flat preliminary industrial production reading, adding to expectations that the BOJ would need to add stimulus. Housing starts data is due next and a 7.6% rebound is eyed. New Zealand’s overseas trade index is also up for release later on and a 1.4% quarterly decline is eyed.