Not much in the way of headlines and volatility, but we did see a bullish spike in NZD on the session. That brings us to NZD/JPY, which may draw in technical traders and risk sentiment traders.
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What to Watch: NZD/JPY
On the one hour chart above of NZD/JPY, we can see the pair just broke above a minor resistance area around the 74.00 handle. There doesn’t appear to be a catalyst for the spike higher on the New Zealand dollar, so it could be technical players at work and/or broad risk sentiment at play.
With not much going on in terms of major catalysts ahead, and with the end of 2020 quickly approaching, we’re checking out the break for a potential pullback as stochastic indicates short-term over bought conditions.
If the pair does retest the 74.00, we’ll be on the look out for bullish candle patterns and support for a potential short-term long position. But unless with get another catalyst for a broad risk-on move (i.e., U.S. Senate approves additional stimulus maybe?), the move higher is likely limited.
But if the market fails to maintain above the 74.00 handle, and we get a catalyst to sour broad risk sentiment (e.g., no additional stimulus, broad equity profit taking ahead of end of year, etc.), then this break could be a fakeout. A fall here could attract more sellers, especially if we see a break below the rising trendline marked on the chart above.