NZDJPY has formed lower highs and higher lows, creating a symmetrical triangle pattern on its 4-hour time frame. Price is currently testing the triangle support around the 75.00 major psychological mark and might be due for a bounce.
Stochastic is indicating oversold conditions and is starting to move higher, suggesting that price might follow suit. However, RSI is still heading south so Kiwi bears might still be in control of price action. Also, the 100 SMA is below the 200 SMA for now so the path of least resistance might be to the downside.
These moving averages are still oscillating, though, indicating the possibility that the range-bound behavior might carry on while traders wait for a market catalyst. A breakout in either direction could lead to a 400-pip move, which is roughly the same height as the triangle formation.
A candle closing below the 75.00 handle could confirm a downside breakout while a bounce past the 75.50 level could indicate an upside breakout.
There are no major reports due from New Zealand this week but Japan has its CPI readings on Friday. Another round of negative readings could spur yen weakness, especially if the results are weak enough to revive speculations of additional BOJ easing.
Other factors that could push for a breakout are the Australian quarterly private capital expenditure report, which would reflect business conditions in the region. Commodity price trends and overall market sentiment could also lead to a strong move in any direction, especially since NZDJPY is nearing the peak of the triangle pattern.
For now, yen strength has been observed across the charts, particularly against the European currencies, as Brexit fears led to outflows from the continent onto Asia. Also, speculations of additional PBOC easing drew demand for the yen’s safe-haven returns.
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