After weeks of skimming along key support, NZDJPY appears to have finally closed below the seven-year trend line that extends off the 2008/2009 crisis lows. This level coincides with the 74.40 handle, which had previously held as support since last August.
The weekly chart below is the same one I posted on January 12th when I detailed some of my top trade ideas for 2016. The trend line with the question mark just below it is the one in question.
This trend line has now fallen on a daily closing basis.
With yesterday’s close in the history books, traders can begin watching for sell signals against new resistance. The first level of support comes in at the August low, however, do note that this level will vary quite a bit from broker to broker.
While a few buyers may emerge between current levels and the August 24th low, I don’t expect to see a meaningful bid develop until the 69 handle. This area capped several advances between 2009 and 2012 and is also the 50% retrace when measuring from the 2009 low to the 2014 high.
Depending on how things play out over the next few sessions, I may approach this in a similar manner as the head and shoulders pattern that developed between 2014 and 2015. I ended up holding that position for several months, pyramiding on the way down as support levels continued to give way.
The remainder of this week should be fairly telling in terms of whether yesterday’s break finds follow-through, which will ultimately determine how I manage any exposure going forward.