Aside from the rising wedge pattern that we traded in February, the choppy price action on NZDJPY has kept me away from the pair for the better part of 2016.
However, a pattern has emerged on the 4-hour chart that could offer an opportunity should the structure confirm.
That structure is a bearish flag pattern that began following the May 6th low at 72.53. This level is also the August 2015 multi-year low, making it a critical level for the yen cross.
As you may well know, a price formation such as this (second chart below) is only confirmed and thus tradable once the pair closes below support. Until then the current price action is nothing more than consolidation.
One thing that makes this bear flag interesting is where the measured objective lines up. If we use the April 28th swing high as our starting point, we get a 480 pip measured move which places the objective at 70.55.
At first glance, this level seems fairly arbitrary. That is until we study the period between 2003 and 2006.
As you can see from the weekly chart above, the 70.55 handle played a crucial role in dictating the pair’s movement during this time. So we can cast any doubt aside as to whether this is an important area.
In summary, if the current channel sets up for us, we could see NZDJPY slide lower toward 72.53. A break below that would expose the measured objective and critical support level at 70.55.
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