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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?

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

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!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.