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With all these uncertainties in the global economy and no signs of a bottom in commodities just yet, I’m looking at this potential swing short forex setup on NZD/JPY. As you can see from the pair’s weekly chart below, a complex head and shoulders formation can be seen, with price currently testing the neckline around 74.00.

NZD/JPY Weekly Forex Chart
NZD/JPY Weekly Forex Chart

A break below this key support zone could set off a 2,000-pip downtrend, which is roughly the same height as the reversal forex chart pattern. Prolonged risk-off vibes and another global inflation slump similar to the one seen last year could mean more heartache for the Kiwi for the next few months.

However, I’m still a tad concerned about potential BOJ easing or currency intervention, which has been the talk of the forex town due to strong yen appreciation these days. Some analysts have even noted that central bank officials have been sneakily engineering currency depreciation by selling a boatload of yen in the market.

For now, I’m keeping close tabs on this potential long-term selloff, ready to short on a strong break of the 74.00 mark or perhaps on a pullback. I’ll probably put a very wide stop close to the right shoulder and I’ll consider adding to my position if price stays on the southbound route.

What do you guys think of this long-term setup? How about my open USD/CAD forex trade? As always, I’d love to get your feedback on my ideas and I hope you review our risk disclosure if you’re joining me on any of these!


Happy time

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