NZDJPY popped up from its previous lows around the 88.00 major psychological level and is in the middle of a forex market correction. Applying the Fibonacci retracement tool on the swing high and low on the pair’s 4-hour time frame shows that the 61.8% level lines up with a broken support area, which might hold as resistance.
For now, price is already testing the 50% Fibonacci retracement level which lines up with the longer-term exponential moving average on the same time frame. This is also in line with the 90.00 major psychological mark, which might keep further gains at bay. In addition, stochastic is indicating overbought forex market conditions, which means that buyers are exhausted and that sellers might take over.
Forex Market Correction Levels
If that happens, NZDJPY could slide back to its previous lows or even create new ones. The shorter-term EMA is below the longer-term EMA anyway, confirming that the downtrend is likely to carry on.
The path of least resistance in terms of fundamentals is also to the downside since the RBNZ is expected to cut interest rates in their next policy statement. The central bank has already put a few measures to curb housing inflation in place, which means that they are gearing up to lower borrowing costs without having to worry about asset price bubbles.
As for Japan, there have been no major reports released lately but the yen could draw support from risk aversion. The BOJ has emphasized that they are not looking to increase stimulus anytime soon and previous inflation readings have shown small improvements in price trends.
However, a surge in risk appetite could still allow the Kiwi to gain traction and push NZDJPY past the Fibonacci retracement levels. In this case, the pair could move up to the previous forex market highs around the 92.50 to 93.00 psychological resistance levels.
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