Yesterday I commented on the 1-hour NZDUSD broadening wedge as a sign of forthcoming weakness. The pair has now carved out a bearish engulfing candle on the daily time frame.
In a similar vein, the NZDJPY formed a bearish pin bar yesterday from a familiar area. I mentioned this same trend line last month which triggered a 270 pip drop.
The level I’m referring to extends from the March high at 78.20 and has now capped three rallies since its inception. And if yesterday’s reversal signal plays out it would make it the fourth time in seven months.
When faced with a decision of shorting the NZDUSD or the NZDJPY, it really just becomes a matter of preference. Obviously, the setup itself is important, but it’s also about which currency you believe to be stronger between the US dollar and the Japanese yen.
Unfortunately, the USDJPY doesn’t help us much as the pair has been trending sideways for the past two weeks. But the fact that buyers haven’t backed off of the 104.30 resistance area does seem to favor the bulls, so I’d have to go with the USD purely based on the last two weeks of price action.
As for the NZDJPY, key resistance comes in at the 75.00 handle while support can be found at 74.30, 73.50 and 72.70. Also, note that Kuroda is scheduled to speak at some point during the Tokyo session so volatility may become a factor.
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