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Woohoo! Bearish momentum is picking up for NZD/JPY so I’m rolling my stop down to reduce my exposure to event risk and potential weekend gaps.

NZD/JPY Short Trade

I was able to hop in at market upon seeing that the long-term range resistance held as a ceiling and price broke below a short-term ascending trend line and the 81.00 mark. I’ve set my sights on the bottom of the daily range close to the 73.00 level, but I’m gonna be making risk adjustments to lock in gains along the way.

NZD/JPY Daily Forex Chart
NZD/JPY Daily Forex Chart

So far, fundamentals are looking good for this short position as the RBNZ sounded more worried than usual about inflation and Kiwi strength. In his testimony that followed the official announcement, head honcho Wheeler even spoke of currency intervention, scaring Kiwi bulls away.

Apart from that, risk aversion has been weighing on higher-yielding commodity currencies recently since the tension between U.S. and North Korea is showing no signs of easing. Instead of taking a more diplomatic stance, a “war of words” seems to be escalating between the two nations with threats being spewed back and forth.

These risk-off flows are also positive for the lower-yielding yen, which is enjoying the lion’s share of safe-haven flows while the U.S. dollar is bogged down by geopolitical risk and weakening Fed rate hike expectations. PPI readings fell short of estimates while FOMC member Dudley has cautioned that it will take some time before inflation hits the 2% mark.

Of course there’s always a chance that sentiment could flip suddenly and force the yen to return its recent gains if the situation improves. There could be a larger degree of risk going into the weekend as headlines on political developments could lead to gaps before the Monday open.

With that, I’m rolling my stop down to entry to leave a risk-free position open. New Zealand also has its quarterly retail sales figures up for release over the weekend and upbeat results might undo the drop. Think I’m making the right decision or should I just close my trade completely?

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.