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With a quiet start to the new trading week and a light calendar ahead, we’re checking out the technical picture on NZD/JPY in case risk sentiment shifts or Japanese data sparks some volatility for the yen.

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Fresh Market Headlines & Economic Data:

S&P 500 rises slightly ahead of a busy week for earnings, Apple pushes Nasdaq 1% higher

Biden to Push Congress on Stimulus After Senators Question Cost

Oil prices steady as lockdowns curb U.S. stimulus optimism

Ifo business climate index declines to 90.1 in January, below an estimated 91.5

BOJ’s Kuroda says economy stable thanks to mix of fiscal, monetary support

Moderna says it’s working on Covid booster shot for variant in South Africa, says current vaccine provides some protection

New COVID-19 strain shuts New Zealand travel to Australia for 72 hours

Upcoming Potential Catalysts on the Economic Calendar

Bank of Japan Monetary Policy Meeting Minutes at 11:50 pm GMT
Japan Services PPI at 11:50 pm GMT

What to Watch: NZD/JPY

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

On the one-hour chart above of NZD/JPY, we can see the pair has been in rally mode over the past week, destined to retest major resistance around the 75.00 major psychological handle. Or is it?

We can see the pair is already finding resistance once again before it gets to 75.00, and with stochastic already moving below the overbought signal territory, a fresh bear move may be in the works.

As mentioned in the intro, it’s been a quiet start to the week and the calendar looks very, very light, but we do have some data from Japan coming out in the upcoming Asia session. The BOJ meeting minutes and Japanese Services PPI data are usually market movers, but with nothing else going on, they may spark some action for the yen.

NZD/JPY is also strongly correlated with overall risk sentiment, so if we do get a surprise headline to shift global sentiment in the short-term, NZD/JPY will be a likely mover.

But for now, with risk sentiment leaning positive and the recent trend pointing higher, bullish setups are the higher probability setups for now. A retest of the rising ‘lows’ pattern is one to watch for bullish patterns if the current environment holds. This could be for both a short-term and swing setup.

Also, a break above 75.00 is definitely a price pattern that will draw attention, but without a fresh catalyst for a bull move higher, the risk of a fake out remains pretty high.

If we get a global risk sentiment catalyst (e.g., more vaccine rollout delays, negative U.S. company earnings, rhetoric from central banks on reducing support, etc.), then it’s likely the yen will rally and a break below the rising ‘lows’ pattern will draw in technical traders. Be on the look out for that as it will likely lead to both short-term and swing moves.