Forex Trade Setup: NZD/JPY Triangle Breakdown

Since I’ve already got some forex setups for AUD/CAD and CAD/JPY, I thought I’d focus on the Kiwi this time. Here’s what I’m seeing on NZD/JPY.

Big Pippin mentioned that the pair already broke below the symmetrical triangle chart pattern on its 1-hour forex chart and might be looking for a quick pullback. I put up the Fibs on the latest swing high and low then noticed that the 50%-61.8% levels line up with the broken triangle support, which might hold as resistance moving forward.

NZD/JPY 1-hour Forex Chart

NZD/JPY 1-hour Forex Chart

Stochastic is moving up for now while the pair has formed a small double bottom formation, suggesting that buyers are currently in control of price action. I guess I’ll just wait for more confirmation from the oscillator and reversal candlesticks around my potential entry area at 76.00 to 76.50.

In terms of fundamentals, I believe the Kiwi has more room to fall since China’s latest Caixin manufacturing PMI reflected a much sharper contraction. This could result to weaker demand for New Zealand’s commodity exports and keep overall risk aversion in play, favoring the lower-yielding Japanese yen.

I’ll be keeping tabs on Japan’s inflation releases towards the end of this week, as the national and Tokyo core CPI readings might reflect larger declines and trigger a pop higher for NZD/JPY. There aren’t a lot of top-tier reports lined up from New Zealand until next week, but word through the forex grapevine is that the RBNZ is considering another interest rate cut in October so I think the path of least resistance for this pair is still to the downside.

What do you guys think? Am I too bearish on the Kiwi?

Cheers,

Happy time

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