NZDJPY has been trading in an uptrend, as a rising forex trading channel can be drawn on its recent price action. The pair is still making its way to the top of the forex trading channel, which might hold as near-term resistance.
The top of the forex trading channel is at the 88.00 major psychological level but it appears that buying pressure is already starting to weaken, with stochastic moving down from the overbought zone. This could lead to a selloff back to the bottom of the forex trading channel range, which is around the 87.00 major psychological support.
Shorting at 88.00,with a tight stop and a target of 87.00 could yield a good return-on-risk, although this would be a countertrend setup. If you are bullish on this pair, you could opt to wait for the bounce off the forex trading channel support instead.
Forex Trading Channel Levels
The biggest event risk for this trade might be the upcoming BOJ (Bank of Japan) interest rate decision, which could lead the forex trading channel to keep holding if no monetary policy changes are announced. On the other hand, further easing from the Japanese central bank could lead to a strong break above the forex trading channel resistance.
Bear in mind that Governor Kuroda appeared to sound dovish in the recent Jackson Hole Summit, as he acknowledged the weakness in exports and cautioned about slower inflation. Data from Japan has been mostly disappointing, particularly in terms of consumer spending and manufacturing production, which might end up weighing on overall economic growth.
Meanwhile, the New Zealand dollar has drawn support from improved risk sentiment, which is boosting higher-yielding currencies. There are no top-tier reports lined up from the New Zealand economy this week, which suggests that the short-term trend could continue and that ranges might hold.
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