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It’s a big week for currencies with a slew of top tier events coming soon to move the markets.

Today, I’m checking out NZD/JPY for a couple of potential setups to play potential volatility coming from the latest quarterly employment data from New Zealand.

NZD/JPY Short Play

NZD/JPY 4-Hour Forex Chart
NZD/JPY 4-Hour Forex Chart

As mentioned in the intro, I’m checking out NZD/JPY for a couple of setups to play my fundamental bias that’s currently leaning towards risk-off.

This past month, risk sentiment shifted back to positive (pricing in the massive stimulus efforts from central banks, some signs of the coronavirus pandemic peaking and talks of reopening), ignoring the economic damage occurring from the global lockdown.

Well, we’re going to start getting a heavy dose of April’s economic data, which I think may bring the focus on the global economy, data that traders may not be able to ignore as it is likely to be very, very bad.

This potential shift plus fresh geopolitical risks this weekend (Trump administration pushing to rip global supply chains from China), I think risk sentiment may shift back towards negative, which is why I’d like to take a short-term shot at buying some Japanese yen soon.

And I’m doing so against the Kiwi since we’ll see the latest quarterly employment report and inflation expectations, which are expected to be pretty bad. This may be priced in already, which is why I’m going into watchlist mode rather than putting into orders at the moment.

What I’m looking at is for the market to break below the rising ‘lows’ pattern marked on the four-hour chart above of NZD/JPY and a round of disappointing NZ data before building a short trade play.

There’s also a potential scenario where the Kiwi rises before/after the NZ data, and if it gets to the major resistance area marked on the chart (around 65.50 – 66.00, I’ll be watching for bearish reversal patterns to play my risk-off lean, especially if NZ’s data disappoints and the big picture themes remain negative.

That’s it for now and I’ve got my alerts set, so there’s nothing to do but wait and keep up with the headlines. What do you guys think?

Are you watching NZD/JPY for a potential short position as well? Let me know in the comments section below!

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