Aha, a breakout! NZD/JPY finally busted through its neckline resistance, suggesting that a long-term uptrend might be in order.
Long NZD/JPY Trade
I’ve had my eye on this double bottom pattern on this pair’s daily time frame for quite a while and, just when it seemed Kiwi bulls couldn’t get past the neckline, an upside breakout took place!
The chart pattern is around 300 pips in height, so the pair could be in for a climb of at least the same size. It has rallied by close to 100 pips now, so it could still have a couple hundred to go from here.
I’m considering hopping in at market to catch the strong bullish momentum, but I’m also thinking of waiting for a bit of a pullback since stochastic is already indicating overbought conditions.
Zooming in to the 1-hour time frame shows a potential pullback entry on a Fib and short-term rising trend line:
Stochastic is also heading lower on this time frame but is closing in on the oversold region to reflect exhaustion among sellers. Turning back up could be an indication that the correction is over.
It seems that the pickup in risk appetite on account of fading geopolitical risks has been the main catalyst for the break higher. It also helped that data from New Zealand has been mostly upbeat lately, dashing hopes that the RBNZ would need to cut rates again soon.
As for my stop, I’m looking at something wide enough to weather the pair’s average daily volatility of 55.5 pips.
Here’s my plan:
Long NZD/JPY at market (70.85) and on a pullback to 70.50 with a stop below the neckline (69.85) and a target of around 200 pips.
What do you guys think?
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