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Risk sentiment is back on a negative swing, and with upcoming economic updates to potentially add to that vibe, we’re checking out yen setups for short-term pips.

Will this support retest (possibly break) on NZD/JPY draw in more sellers?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming in EUR/JPY on risk-off flows & technical breaks, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 10237.35 -2.90%
FTSE: 5702.55 -3.41%
S&P 500: 2769.13 -1.80%
DJIA: 22818.74 -1.86%
US 10-yr 0.609% -0.042
Bund 10-YR -0.544% -0.018
UK 10-YR: 0.205% -0.002
JPN 10-YR: -0.007 -0.011
Oil: 26.14 +3.36%
Gold: 1737.10 +1.20%
Bitcoin: 9621.79 +3.20%
Ethereum: 201.85 +1.08%

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:

  • ECB de Guindos speech at 3:00 pm GMT
  • Fed Kashkari speech at 5:00 pm GMT
  • Fed Kaplan speech at 10:00 pm GMT
  • New Zealand Manufacturing index at 10:30 pm GMT
  • Japan PPI at 11:50 pm GMT
  • China Industrial Production, Retail Sales, Unemployment rate at 2:00 am GMT (May 15)

What to Watch: NZD/JPY

NZD/JPY 1-Hour Forex Chart
NZD/JPY 1-Hour Forex Chart

As mentioned in the Headlines, traders are in sell mode on risk assets as economic and trade war fears have been rising over the past session. This has led to a steady rally in risk assets on the session, including the Japanese yen, the de facto major currency “safe haven.”

And with more data ahead in the upcoming Asia session to fuel economic fears, the odds are pretty good that this theme could continue, most notably the updates coming from China.

With recent sentiment sour on the Kiwi dollar after a very dovish RBNZ monetary policy meeting (RBNZ leaves negative rates on the table), this makes NZD/JPY likely one of the best plays for short-term pips until market themes shift once again.

In terms of price action, NZD/JPY is testing a very strong support area between 64.00 – 64.50, so the question now is whether it’ll break or will buyers take back control?

Well, the odds are in favor of the bears at the moment, and if we do see negative economic updates from China and New Zealand coming soon, then a break below 64.00 will likely draw in more sellers.

If you’re looking to play that scenario, shorting from current levels up to 64.50 makes sense if you’re aggressive. And for the more prudent, waiting for the data and a “break/retest/hold” pattern around 64.00 is the scenario to watch out for.

For the bulls, we gotta see a combination of both positive surprises from NZ and CN later in the Friday Asia session, as well as a positive shift in global risk sentiment.

That’ll likely take a positive turn in COVID case/death numbers, fresh stimulus measures from major economies, and/or positive news on COVID drug therapies/vaccines.

In this scenario, a break above 64.50 is the buy signal that could draw in traders, and with a daily ATR of around 90 pips, the top of the range around 66.00 is a reasonable 2 – 5 day target.