NZD/JPY Back On Its Bullish Trend
Technical Sentiment: Bullish
- RBNZ increased the Official Cash Rate to 3.25% as expected;
- RBNZ’s McDermott reveals expectations for a further 0.5% increase this year;
- Traders focus on yields, pushing NZD higher across the board.
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While RBNZ expects the NZD to drop in the near future, at this time traders are more preoccupied with yields and they completely disregard all other intentions. NZD/JPY rallied 150 pips during the Asian and European sessions, with further gains expected in the coming days as short trades are being covered.
NZD/JPY is currently trading around 88.60 at the start of the US session. The pair probed a weak resistance trendline without any major bearish reactions thus far, as higher resistance levels are being targetted.
The rally above 87.42 has completely invalidated the recent bearish technical swing bias of Lower Highs and Lower Lows, signaling the retracement within the long term bullish channel has been completed. The main uptrend should resume at full strength above 88.60. First resistance level is priced at 89.19, marked by 6th May top, a level confirmed several times in April as well. Secondary resistance lies at 89.89; 1st March top and 2014’s highest level.
The large psychological handle at 90.00 should provide some resistance for buyers and an opportunity to consolidate. Stochastic is already in overbought territory on the Daily chart, yet it should be noted that NZD/JPY usually continues to rally hard during uptrends despite heavy overbought conditions. The preferred strategy is to buy dips, expecting the pair to print Higher Highs in the coming days and weeks.
The main support lies at 87.42, the previous price pivot zone and 200 Simple Moving Average on the 4H time frame. The 50-Day Moving Average, priced at 87.66, further strengthens the support area.