NZD/JPY looks promising for a few setups, with potential volatility ahead with the latest employment data from New Zealand coming this week.
NZD/JPY Uptrend Pullback Ahead?
We’ve got the four hour chart above of NZD/JPY and we can see a few technical setup in the works for both bullish and bearish biases this week.
If you’re a bull, the first technical setup to be on the look out for is a break above the previous swing high (around the 75.00 major psychological handle), which is currently being tested at the moment.
A break above this level is a high probability setup for a long position given that the pair is in a longer-term uptrend, driven by positive global risk sentiment on expectations of a recovery from the COVID-19 pandemic. As long as that theme holds, it’s likely the uptrend will continue to have legs after a break.
For the bears, a technical argument can be made due to the bearish divergence between price action and the stochastic, and if the resistance actually holds and forms a double top at the 75.00 major psychological handle. This setup would likely draw in technical sellers, especially if we see broad risk sentiment shift towards negative in the short-term.
So which way will the pair go? Well again, broad risk sentiment is leaning positive, but we do have a potential catalyst in the form of the latest employment data from New Zealand that could shake up traders in the Kiwi. Expectations are for a round of disappointing updates on jobs (jobless rate inching higher to 5.4%, net job loss in Q4 2020).
If that’s the case, or worse, that resistance is likely to hold and draw in sellers for at least a short-term move. With a daily ATR of around 60 pips, that could be an opportunity for a scalp or day trade, but the max gains may be limited to the rising ‘lows’ pattern. That area is a strong area of interest that could draw in longer-term players looking to play the overall trend higher and recovery themes.
What do you all think? Are you watching NZD/JPY for a potential trade? If so, what’s your directional bias and entry strategy? Let me know in the comments section below!
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