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Traders are negative on risk for the session on second wave concerns, pushing the Japanese yen higher against the majors, including NZD/JPY.

Does this downtrend in NZD/JPY still have legs to play today’s driving theme or is the move set to run out of steam?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/JPY after downbeat data from the U.K., so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 12186.63 -2.74%
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S&P 500: 3114.71 -2.36%
DJIA: 26229.29 -2.82%
US 10-yr 0.674% -0.074
Bund 10-YR -0.414% -0.084
UK 10-YR: 0.198% -0.071
JPN 10-YR: 0.004% +0.018
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Fresh Market Headlines & Economic Data:

Stocks set to plunge at the open on virus second wave concern, Dow futures down 900 points

US weekly jobless claims total 1.542 million, vs 1.6 million estimate

U.S. Producer Price Index for final demand rose 0.4 percent in May

Treasury Secretary Mnuchin says ‘we can’t shut down the economy again’

Europe Prepares to Restart Travel With Rest of World in July

French payroll employment dropped by 2.0 % in the first quarter

Italian industrial production index decreased by 19.1% m/m in April

ECB will do anything to avoid credit crunch – Lane to paper

U.S. oil prices tumble 7% as worries of resurgence in coronavirus and rise in U.S. inventories slams futures

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

New Zealand Manufacturing Index at 10:30 pm GMT

Japan Industrial Production at 4:30 am GMT (June 11)

U.K. GDP & Manufacturing Production at 6:00 am GMT (June 11)

What to Watch: NZD/JPY

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

Big change in sentiment this session as fears of a second wave and a dovish Fed outlook sent traders into risk-off mode in today’s session.

NZD/JPY is following that theme as the pair has been in a one-way move lower since the Asia open, falling nearly 100 pips since breaking below the 70.00 major psychological handle. Is there more room to run?

Well, without any more catalysts ahead, the trend has a low probability of reversing, but after a 100 pip move (right around the daily ATR of 97 pips), there is a chance of a pause.

But volatility could pick up later with the latest New Zealand manufacturing data coming soon, and possibly on the latest Japanese industrial production data coming in the Asia session.

For the bears on NZD/JPY, the ball is still in your court, but you may want to wait for a pullback before shorting. If we do see a bounce up to the 69.50 – 70.00 area and bearish reversal patterns, that’s a solid signal to put together a short position for both a short-term and swing play.

For the bulls on NZD/JPY, the trend is definitely not your friend, but if we see a shift back to positive risk sentiment (i.e., positive coronavirus vaccine/therapy news, more stimulus measures) and a better-than-expected NZ data vs. worse-than-expected JP data, then there’s a chance a rally could form on the pair.

If that scenario plays out, then bullish reversal patterns around this area down to the 68.00 handle may draw in buying support in the short term.