Despite the seemingly chaotic price action at times, the NZDJPY has been relatively consistent over the last 14 months. The considerable 500 to 800 pip swings on the daily time frame have been a swing trader’s dream.
The key, of course, is determining a likely turning point at each swing high and low. Trend lines can work well but ascending and descending channels are better in my opinion.
Since carving a low of 76.10 in November of last year, the NZDJPY has rallied 520 pips. That puts us right in that 500 to 800 pip range that has been in place since late 2016.
Moreover, there is an ascending channel on the 4-hour chart that could produce a favorable opportunity over the coming sessions.
The thing to remember here is that just because the pair is moving within an ascending channel, it does not mean a breakdown is imminent. In other words, it doesn’t have to drop today, tomorrow or even this week.
It’s better to let the channel run its course than trying to pick a top.
That said, patterns like this can help us identify a possible turning point. A 4-hour and especially a daily close below channel support could be enough to change the pair’s direction. Such a break would expose the 80.15 area followed by 79.20 and 78.35.
See the second half of this lesson to learn how to trade channel breakouts.
Key resistance comes in at the current 2018 high near 81.25. A close above that would extend the rally toward the 82.00 handle.
There’s an interesting dynamic across the yen pairs at the moment. As I’ve mentioned in the past, the USDJPY is a sort of benchmark for the yen. As such, strength or weakness in the USDJPY can often spill over into the yen crosses.
We’ll have to wait and see whether this time is different or if the increasing weight of the USDJPY will start to drag others like the EURJPY and GBPJPY down with it. My gut tells me it’s the latter.