My friend Forex Gump pointed out a short-term setup on NZD/JPY earlier today, but I think there are swing opportunities as well given the current environment.
Will the recent resistance break-and-retest draw in buyers to continue the trend higher?
Upside Consolidation Break in NZD/JPY?
On the four hour chart above, we’ve got a two month look at NZD/JPY, which has been in somewhat of a slow grind higher as the pair ranged through the latter half of November and early December.
But the bulls found legs once again just before the holidays, likely on the continued themes currently driving the markets towards risk assets, mainly hopes of a recovery in 2021 from the COVID-19 pandemic, as well as expectations of continued monetary policy stimulus from the world’s central banks.
And with a pretty light calendar for both New Zealand and Japan this month, odds are still in favor of the bulls on NZD/JPY as long as we don’t see any surprises to throw of the broad lean positive in global risk sentiment.
So, if you expect these conditions to hold for the next few weeks, take the recent upside break and pullback to previous resistance (around the 74.00 major psychological level) as a potential starting point for a swing trade long position.
Also keep in mind that this recent up move is part of a break above a falling ‘highs’ pattern on the daily chart. For you longer term traders, this may be the start of a bigger move back to the upside, for a very strong potential return-on-risk if using the other side of the consolidation pattern as a stop guide, while targeting a max 2 – 3 weekly ATR from here.
For me, I’ll be keeping my eye on the pair, hoping for a little deeper pullback before going long, but staying on my toes if it bounces from current levels.
What do you all think? Are you watching NZD/JPY for a potential trade? If so, what’s your directional bias and entry strategy? Let me know in the comments section below!
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.