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Risk appetite might be ready to turn a corner soon as some geopolitical tensions are starting to fade, possibly resulting to a strong rally for the higher-yielding Kiwi.

Long NZD/JPY Idea

This pair has formed a double bottom over the past few months but has had some trouble breaking above the neckline resistance to confirm that a long-term uptrend is in order.

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

This hesitation was mostly due to risk factors coming into play over the past few weeks, including uncertainty about the U.S.-China trade deal, Brexit-related developments, and protests in Hong Kong.

Some of these issues could be settled soon, though, possibly lead to a wave of relief for commodity currencies and profit-taking for safe-havens like the yen.

It’s also worth noting that most economic reports from New Zealand have turned out better than expected recently, including the quarterly PPI and credit card spending figures. These could hint that overall inflation and retail sales data could also beat expectations, lowering odds of another RBNZ cut.

On the flip side, data from Japan has been far from impressive, keeping yen traders wary of potential BOJ easing soon.

Zooming in to the 1-hour time frame of NZD/JPY shows a potential breakout entry past the 70.00 range resistance.

NZD/JPY 1-hour Forex Chart
NZD/JPY 1-hour Forex Chart

Price has formed higher lows on this time frame also, confirming that buyers are getting stronger, while stochastic has some room left to climb.

Moving averages on this pair also reveal that the trend is very much bullish.

NZD/JPY Moving Averages from MarketMilk
NZD/JPY Moving Averages from MarketMilk

I’m looking to go long at 70.25, with a stop below the range support or 68.75 and a target of the same height as the daily double bottom or 250 pips.

What do you guys think?

Happy

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