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Looks like the rally in NZD/JPY could be done with these textbook bearish technical setups in the works. Are sellers about to take back control?

New Leg Lower in NZD/JPY?

NZD/JPY 4-Hour
NZD/JPY 4-Hour

After bottoming out early August just above the 72.00 handle, NZD/JPY made a nice run higher to the tune of a near 3.75% move to the 75.00 handle. But the last couple of sessions haven’t been too kind to the Kiwi, likely on disappointing reports from New Zealand (weaker-than-expected building consents and business confidence), and possibly from weak data coming from its big trading partner Australia showing economic weakness in the region.

With that move, we’re now seeing a possible swing top on NZD/JPY, which happens to coincide with the 50% – 61% Fibonacci retracment area and Stochastic moving out of overbought territory. This also lines up with a higher time frame bearish setup that was pointed out earlier in the week on the Daily chart by my main man Big Pippin.

So it’s likely that medium-term and longer-term traders are pushing this pair lower, and possible this could be the start of a fresh leg lower in the longer-term trend.

With no major economic catalysts on the calendar for New Zealand or Japan until mid-September (Bank of Japan monetary policy statement & New Zealand quarterly GDP report), it’s likely technicals and global sentiment will be the likely drivers for the next couple of weeks. And with Trump looking to “ratchet up” the trade war with China today, global risk sentiment could fall back into risk aversion mode, which would likely support “safe haven” assets like the Japanese yen.

With a break already in the works, I’m gonna take a nibbler here and another nibble if there is a pullback higher to the swing high area around 75.00. My stop will be a full weekly ATR from the average entry of both positions to give the position room to breathe, and I’m looking to initially target the previous swing low:

Short quarter position NZD/JPY at market (73.77), max stop at 76.10, initial target at 72.50

Short quarter position NZD/JPY at market (75.00), max stop at 76.10, initial target at 72.50

I’ll be risking only 0.50% of my account if both positions go live, I have an initial 1:1 return-on-risk, but I’ll look to maximize my R:R if the pair reaches the swing low and pushes lower.

Again, with top tier events ahead and fast developments happening in geopolitical news, I will not hesitate to adjust quickly (i.e., cancel orders, close trade, reverse trade) depending on what happens and how the markets react.

Stay tuned and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

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.