The NZDJPY has been trending higher since carving a 2017 low in April just below the 76.00 handle. That puts the pair up 680 pips for the year at the time of this writing.
However, since the start of July buyers have taken a breather. For the past seventeen trading days, the pair has been trapped in a 120 pip range between 82.00 and 83.20.
This could very well be the consolidation before the next leg higher. Then again, the range top at 83.20 is just 60 pips below the double top that developed between December 2016 and January 2017.
Moreover, that December 2016 swing high was also the high for the year. Similarly, the January high from earlier this year is the current 2017 high. This combination makes 83.80 a critical level for the yen cross.
With all of this in mind, we could make the argument that recent consolidation is a topping pattern. But without a daily close (5 pm EST) below the range floor at 82.00, there’s nothing to confirm that theory.
But there is one thing we do know – a break to the downside would likely have more room to run given the 165 pips between 82.00 and 80.35. Compare that with the 60 pips between 83.20 and the 83.80 handle, and you can see why I’m not as interested in trading a break to the upside.
It is true that the short-term trend is up, but a broader view shows that the pair has been ranging since the second half of 2015. As you may have guessed, the top of that multi-year range is 83.80.
In summary, I’ll only entertain a short position if sellers manage a daily close below 82.00. Such a close would open the door for a move to 80.35 and possibly 79.50. Alternatively, buyers would need to secure a daily close above 83.80 for me to entertain a long position.
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