NZDJPY continues to consolidate below a long term resistance level.
The trend line in the chart below extends from late December 2014 and has capped every advance since.
You’ll notice, however, that NZDJPY hasn’t carved a new swing low since mid-2016.
Whether that’s a bullish sign is yet to be seen.
What I do know is that NZDJPY will continue to struggle to make gains while below this trend line from the 2014 high.
That leaves us watching for selling opportunities, but from where?
The ascending channel on the daily time frame below offers some clues.
I wrote about this pattern on March 6th. And as you can see, not a lot has changed.
However, the fact that this channel is now three weeks older means that a break may not be far away.
That’s especially true if the USDJPY did, in fact, breakdown last Friday.
The USDJPY is an excellent barometer for yen strength, so a move lower there often spills over into the yen crosses such as NZDJPY.
Furthermore, the longer a market consolidates, the more aggressively the resulting breakout will be.
At least that’s always been the consensus.
So here’s how I’m approaching NZDJPY for now:
A daily close below channel support near 75.20/30 would confirm the short setup.
It would also expose the 72.40 key support level. That leaves traders with approximately 280 pips of real estate.
The alternative would be a daily close above trend line resistance near 77.30/40.
That would confirm the break of the 2014 trend line and perhaps open the door to the December 2018 swing high at 78.70.
But if that happens, NZDJPY buyers may struggle to gain traction above the ascending channel top in the chart below.
We’ll see how the market reacts to Tuesday’s RBNZ rate decision and statement at 9 pm EST.
That could be a pivotal moment for NZDJPY.
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