Thanks to news of RBNZ intervention, NZDJPY has made a strong break below a key support zone before starting a corrective forex wave pattern. The impulse wave has lasted until the 84.50 minor psychological support and a pullback to the 86.00 major psychological resistance might take place.
Earlier today, Japan’s mixed results for its Tankan survey cut the impulse wave short and triggered the start of the forex wave pattern for a retracement. The 38.2% Fibonacci retracement level lines up with the broken support zone and 86.00 area, which might hold as resistance.
Stochastic is moving out of the oversold area, indicating that buyers are in control of price action for the time being. If the oscillator reaches the overbought area, it could indicate a return of selling pressure and the end of the corrective forex wave pattern.
Forex Wave Pattern Forecast
A higher corrective forex wave pattern can reach until the 50% to 61.8% Fib levels, which also line up with areas of interest. However, an upside break past these levels would indicate that an uptrend might be likely.
Fundamentals suggest a downside bias for this pair, as the RBNZ has recently confirmed that they intervened in the currency market to keep the New Zealand dollar weak. This could lead to fears of more forex intervention, which would keep any gains in check. Take note though that the Japanese economy is also on a weak footing, as the country hasn’t recovered from the impact of the April sales tax hike.
Indications that the BOJ could ease again might spark yen weakness and a larger forex wave pattern. Risk sentiment also favors the lower-yielding yen, which is currently supported as geopolitical risks are stemming in Hong Kong. Further declines could push NZDJPY down to the 84.00 major psychological handle or the 80.00 mark eventually, as the dairy prices could also weigh on the Kiwi.
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