In 2014, NZD/JPY has been bullish/ranging for most of the year until a sharp rally that started mid-October revived the prevailing bullish outlook.
New High on the Year: The daily chart shows that after a retreat from almost 94, NZD/JPY bounced off its previous range resistance around 90 and has cracked 94 during the 12/29 session. The moving averages and the RSI reflect a sharp bullish trend that has room to run as the RSI reading is not yet overbought. Even if the RSI reaches 70, the momentum of the prevailing trend can keep the daily chart in “overbought” mode for some time.
Anticipating a Correction: Let’s examine a short-term correction scenario either from around 94, or after a more clear break above. If the market is still in a bullish continuation mode, there’s a good chance it will find support around 92.00. If NZD/JPY indeed shows it can hold above 92, it will further confirm the bullish continuation scenario.
As NZD/JPY continues to roar, the next key resistance can be found on the monthly chart.
2007-Highs: The monthly chart shows that price has been bullish since 2009 after the pair bounced off of 44.20. The RSI is also not overbought yet, and the candlesticks in the past couple of months indicate a bullish trend that can potentially push to the 97.80 high from July 2007. This is a record high, but most charts will show the 95.00 area to be a more important level, because that is where the June 2007 month closed.
Anticipating Resistance and Consolidation:
Will we find resistance as price pushes at 95.00? We should wait for at least a monthly bearish candle of significance to introduce the idea of exhaustion and some medium-term consolidation.
We have seen bearish engulfing monthly candles or outside bars followed by a few months of decline in November 2004 and July 2007. However, a similar bearish engulfing candle in Jan. 2004 was followed by some sideways action and then a bullish continuation.
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