Traders have been hungry for more risk these days, allowing NZD/JPY to make an upside break from consolidation.
Think the pair could pull back to gather more bullish energy?
Before I show you the potential setup, you might want to read up on the major headlines during the Asian session:
- Trump administration gives go signal to Biden transition
- Brent crude oil rises to highest since March on vaccine hopes
- President-elect Biden to tap former Fed head Yellen for Treasury
- U.S. flash manufacturing PMI up from 53.4 to 56.7 vs. 52.5 forecast
- U.S. flash services PMI up from 56.9 to 57.7 vs. 55.8 forecast
- BOE official Haldane foresees 2% GDP contraction in Q4
- BOJ Governor Kuroda: Pickup in economy is only moderate, ready to take policy steps without hesitation
- RBA Deputy Gov Debelle: Does not expect rate hike for next three years
- Debelle: AUD has come down by a noticeable amount
Upcoming Potential Catalysts on the Economic Calendar:
- German final GDP at 8:00 am GMT
- German ifo business climate index at 10:00 am GMT
- U.K. CBI realized sales at 12:00 pm GMT
- BOE MPC member Haskel to give a speech at 12:30 pm GMT
What to Watch: NZD/JPY
NZD/JPY busted above the resistance around the 72.00 handle then zoomed up to the 73.00 mark over the past trading sessions.
The pair appears to be taking a break from its climb and could be due for a correction to the Fibonacci levels where buyers might be waiting.Stochastic has been indicating overbought conditions for quite some time, which means that bulls are feeling exhausted. However, the 100 SMA looks ready to cross above the 200 SMA to signal that the climb is likely to resume soon.
These dynamic inflection points happen to be right around the 61.8% Fib, which is in line with the former resistance zone.
A continuation of risk-on flows could keep this pair afloat and might even yield a shallow retracement to the 38.2% Fib at the 72.50 minor psychological mark.
Keep in mind that BOJ head Kuroda earlier on mentioned that the central bank is ready to take policy steps without hesitation, citing that the recovery in the economy has only been moderate.
