NZDJPY has been moving in a steady uptrend inside a tight ascending forex trend channel on its 4-hour chart. Price is currently testing the channel support near the 87.50 minor psychological level while stochastic is almost in the oversold area.
Buyers could return once stochastic climbs out of the oversold zone but for now, it looks like sellers could stay in control. If selling pressure remains strong, price could break below channel support and start a reversal. This descending forex trend could carry on until the next support zone near the 86.50 to 87.00 psychological levels.
On the other hand, a bounce could take the pair up to the channel resistance near the 88.00 major psychological level. Going long at market with a tight stop and a target of 88.00 could yield a high return on risk for a day trade. If you’re bearish on this pair, you could wait for an actual test of 88.00 or a break below the channel support and a longer-term profit target.
Forex Trend Forecasts
Earlier today, the RBNZ announced its decision to keep interest rates unchanged at 3.50% for the time being while calling attention to the overvalued Kiwi. This prompted talks of potential currency intervention from the RBNZ, challenging the ongoing upward forex trend for NZDJPY. However, weak fundamentals from Japan might also be enough to keep this pair afloat.
Speculations of BOJ easing have also been running high, as the Japanese economy appears to be having trouble recovering from the negative impact of the sales tax hike back in April. BOJ officials have remained upbeat about the economic prospects but are recently starting to acknowledge that certain sectors of the economy might need support sooner or later.
In the meantime, risk sentiment appears to be favoring the Japanese yen as well, leading to higher odds of a forex trend reversal for NZDJPY.
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