The NZDJPY just completed the first leg of a rising wedge reversal. And true to form, the first move lower was quite aggressive, covering 200 pips in just over 24 hours.
But it wasn’t just the rising wedge that caught my attention. While not the most convincing bearish signal, last Thursday’s session carved out a bearish engulfing candle in addition to the 4-hour wedge.
A few hours later sellers were off to the races with an initial target of 81.00. Now that the pair has hit this level and consolidated, the plan becomes evident.
A close below the 81.00 handle would likely kick off the second leg of this bearish reversal.
There is, of course, a chance of a bounce from current levels. However, the lack of follow through from buyers over the past 48 hours suggests that the bears remain in command.
Should sellers come through with a close below 81.00, it would open the door for a move toward the next support at 79.40. A proper entry would yield about 160 pips provided sellers maintain control.
Because it was a key pivot for the pair between October of 2015 and January of this year, thus it’s likely to attract a few bids on the way down.
Note that the upcoming holiday lull will drain some liquidity from the market as it does every year. As such, it may be a good idea to halve your position size or even close up shop until next year. Both are viable options in my opinion.
But as always, the final decision is yours.
Want to see how we are trading this setup? Click here to get lifetime access.