NZDJPY has been on a selloff on its 4-hour forex chart but an FX retracement has been taking place. Price has bounced off its lows near the 85.00 major psychological level and is currently testing the 90.00 major psychological resistance.
This lines up with the 61.8% Fibonacci FX retracement level on the latest swing high and low. If the level holds as resistance, NZDJPY could resume its selloff and head back towards the previous lows.
FX Retracement Forecast
Stochastic is already making its way down from the overbought level, indicating a pickup in selling pressure. If bearish momentum carries on, the pair could even make new lows below the 85.00 mark.
In today’s Asian trading session, New Zealand printed mixed figures for its PPI report. Input prices marked a worse than expected 0.4% decline while output prices had a smaller than expected 0.1% drop. Yesterday, the BOJ refrained from announcing additional stimulus and even upgraded its export outlook.
With that, the path of least resistance for NZDJPY is to the downside. There are no event risks for this FX retracement setup today, as New Zealand and Japan have no other reports lined up for the rest of the week.
Risk sentiment could play a key role in determining this pair’s direction though, as market participants wait for a debt deal between Greece and the European Union. Talks of a 6-month loan extension haven’t been confirmed, leading traders to hold off any risk-on trades for the time being.
Positive developments could spark risk appetite and lead to more gains for the Kiwi, potentially invalidating this FX retracement setup and leading to an upside break of 90.00. If that happens, NZDJPY could make its way up to the next resistance area near 94.00 or perhaps go for the 95.00 major psychological mark.
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