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NZD/JPY Testing Above Triangle

Mr. Kiwi is having a good start to the month with NZD/JPY testing above triangle pattern we identified months ago. But should we be all excited or is there some barrier barrier preventing Mr. Kiwi to jump higher?  Let's take an IDDA approach to find out.

Technical Analysis - NZDJPY Testing Above Triangle

Medium Time Frame

The NZD/JPY pair broke above an upward moving Ichimoku cloud on October 26th, and has been continuing above a very thin and flat cloud eversince. We have been eyeing 75.75 as we have discussed in our Facebook group. However the pair is still trapped inside a new Triangle pattern. The good news is that on first trading day of the month, the pair is already attempting to break above it and opened above a median pivot level of 74.75.

This could signal further bullish moves towards medium-term target of 75.75 --  the 50% Fibonacci retracement level and an important resistance. 

The pivots remain on the Ichimoku cloud and 73.45 and 72.50.

NZDJPY Testing Above Triangle - Forex Technical Analysis Daily Chart

Long Time Frame

On the monthly chart, NZDJPY remains inside a thick, upward-moving cloud, indicating a long-term consolidation.

The brand new candle for November seems to be trying to to move up and away from the solid consolidation.

NZDJPY Testing Above Triangle - Forex Technical Analysis Monthly Ichimoku

The Ichimoku cloud itself is moving upward however its lower band is acting as a solid support.

Fundamentals - NZD/JPY Testing Above Triangle

Japan Side: The Bank of Japan (BOJ) decided to maintain the short-term negative interest rate at -0.10% earlier during the Asian session today. They will be carrying on with the current pace of JGB purchases so holdings can increase at an annual pace of 80 trillion JPY.

However, the policymakers of the land of the rising sun admitted that risks to economic growth and inflation are a bit to the downside, particularly when it comes to export activity and output. They mentioned that there’s still some momentum in price levels but that it weakened recently, adding that inflation could rise towards 2% in the second half of 2018.

Still, BOJ folks agreed to keep very close tabs on price developments in the coming months. They will continue to implement QQE until the economy achieves its 2% inflation target.

Also, BOJ officials warned that lower confidence in fiscal stability could cause the Japanese economy to perform weaker than expected. All to create a weaker outloon on Mr. Japanese Yen.

New Zealand Side: Later today (which is November 2nd in the Land Down Under) at 9:45 PM GMT, a hefty quarterly jobs report will be released out of New Zealand.

In last quarter (Q2) net employment in New Zealand increased by 2.4%. That was a lot better than the expected 0.6% increase.

For the Q3 jobs report today , employment in New Zealand is expected to increase by 0.6%, which is obviously slower than the previous quarter’s 2.4% increase. With this a lower-than expected outcome could take a hit on Mr. Kiwi's joyous upmoves.

Market Sentiment - NZD/JPY Confirms Above Ichimoku

46% of  NZD traders were long the pair yesterday. However, the trading crowd has grown further net-short from the day before while moderated since last week. Towards the end of the Asian session the bullish sentiment slowed and turned into indecisiveness. The combination of current sentiment and recent changes gives a further mixed trading bias.

Trading Strategy - NZD/JPY Testing Above Triangle

Considering all points of the IDDA, we are in a wait-and-see situation. The short-term bullish range seem to have narrowed down.

Bullish Scenario

If you have been following our signals, you probably are already in a bullish NZD/JPY position. If you haven't yet taken profit, depending on your  risk tolerance, you could consider either exiting now before the next round of volatility starts at New Zealand jobs report, or you could stay in targeting 75.50 - 75.75.

Stop-loss can be set at 73.45.

Next step: Better-than expected jobs report from New Zealand could extend our bullish outlook with next targets set at 78 and 80 in extension.

Bearish Scenario

A break back below the Ichimoku cloud on the daily chart would change our outlook back to bearish, with 73.45 as first alternative target

Here are Invest Diva's calculations for important NZD/JPY approximate levels to keep an eye on: