In yesterday’s analysis we looked at the potential for an NZDJPY breakout. Today confirmed the breakout as the pair moved (and closed) above the upper wedge resistance.
From here I like the chances of a retest of the 89.90 level in the coming days. It should be noted that we’re currently sitting at resistance around the 89 level, which is marked by several highs during the first two weeks of April.
If the strong push higher is to continue, we may see near-term support come in around 89, which is represented by several highs in early May.
Note that the New Zealand GDP announcement is less than an hour away, so expect some volatility over the next few hours.
I also mentioned yesterday the 1.0755 level for AUDNZD. Today we saw the market reach this level and react accordingly. Due to the small pin bar however, I’m not overly convinced that the market has reached a swing low. If the tail of today’s pin bar had been twice as long it certainly would have helped convince me that the market is ready to move higher.
In addition, if the pair had been in a strong uptrend for several months or even years, trading a smaller pin bar could be justified. But the fact is that AUDNZD just recently put in a higher high, breaking out of the range between 1.054 and 1.091. Even then the pair was unable to hold on to the top of this range once it broke out.
That said, the pair hasn’t convinced me just yet that it has truly turned the corner and today’s close is no different.
EURCAD on the other hand put in an interesting bearish pin bar today. The pair has been trending down since March and appears to be heading toward the 1.444 support level. This level is marked by lows from January of this year as well as a high from October of last year.
The only thing I’m not crazy about is the fact that the market has been hovering just below the key level at 1.474. I would have preferred to see a drop through this level followed by a gradual retrace and then a bearish pin bar as a sell signal.
Still, given today’s pin bar I do think there’s a good chance that supply will outweigh demand at least in the short to mid-term. The risk to reward ratio here is also advantageous, with about 50 pips to the tail of the pin bar and 280 pips to the next key support level.