On December 15th, 2016 we discussed a combination of bearish patterns on the NZDJPY. The confluence of resistance at 83.30 and 4-hour rising wedge spelled trouble for buyers.
The very next day, on December 16th, the pair closed below wedge support on the 4-hour time frame. Sellers went on to take the pair 230 pips lower over the next six sessions.
Since then the NZDJPY has been relatively quiet. The consolidation that began on the 26th of December has lasted until today.
But that may be about to change. If we look at the 4-hour chart below, it appears that sellers are readying for the next leg down. And as mentioned on December 15th of last year, the next support level below 81.00 comes in at 79.40.
If you want to see why 79.40 is important, look no further than the price action between October 2015 and February 2016.
There are two ways to approach the NZDJPY, apart from staying on the sideline of course.
The first is to wait for a 4-hour close below the 81.00 area. From there any retest of the level as new resistance could offer a favorable opportunity to get short.
For those looking for a bit more conviction, a daily close below this area would suggest the same – that sellers are back in control.
Either way, we’ll need to see the 81.00 region hold as new resistance should the pair follow through on either scenario I just mentioned. Key support comes in at 79.40, leaving approximately 160 pips for us to work with.
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