NZDJPY has been on a continuous decline after the RBNZ cut interest rates last month, but a short-term pullback opportunity is presenting itself on the 1-hour chart. Price is pulling up from its recent sharp drop and may be ready to test a broken support level.
The pair previously broke below support at the 83.50 minor psychological level then dipped to the 82.50 minor psychological level before pulling up. Using the Fibonacci retracement tool on the latest swing high and low shows that the broken support lines up with the 50% Fibonacci level, which might hold as resistance.
Stochastic is already indicating overbought conditions, which means that buying pressure is weak and that sellers could push prices back down. With that, a move towards the previous lows or the creation of new ones could be possible. RSI is still on the move up but is near the overbought area.
NZDJPY Fundamental Factors
Risk aversion could stay in the financial markets after Greece recently defaulted on its loan to the IMF. This could spark talks of debt contagion and a potential exit from the euro zone, which might do more harm than good to market sentiment.
Earlier today, Japan printed decent improvements in its Tankan survey, confirming that the BOJ doesn’t need to increase its easing efforts. The manufacturing component showed a climb from 12 to 15 while the non-manufacturing component improved from 19 to 23. Aside from that, the final manufacturing PMI was upgraded from 49.9 to 50.1 in June, which means that the industry actually expanded last month.
Later on, New Zealand is set to hold a dairy auction, and another decline in prices could mean more losses for the Kiwi. Note that its growth and trade figures have been tumbling in the past months, mostly due to falling export volumes and lower dairy prices. Speculations of another RBNZ cut could push NZDJPY back down if this trend persists.
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