Since the bullish bounce off the 200-Day Moving Average in early February, NZD/JPY has rocketed in search for a higher swing high for the current uptrend. This week’s high at 89.89, just shy of the 90.00 handle, has the potential to be the current swing high the pair was looking for.
Within the main bullish channel formed between August 2013 and the present day, the impulsive waves move inside their own channels at a much steeper angle. The latest 850 pip bullish move was no exception, with the impulsive wave reaching the main channel’s resistance on April 1st. Furthermore, on the Daily chart the pair formed a small Pin bar that day, a bearish reversal price action pattern.
NZD/JPY has now reached the first minor support levels; consequently this is the area where price will decide if the uptrend will continue or if a deeper correction is in play. The 50 Simple Moving Average is trailing just beneath the market price. Immediately below it, the previous two highs at 88.30 could become a pivot zone, adding strength for the bullish red trendline. While the pair holds above this level another run towards 90.00 is possible.
A break below 88.30 points towards a deeper correction towards 86.64; where a confluence between the 200 Simple Moving average on the 4H chart and the 38.2% Fibonacci retracement form a strong support area. Even lower, NZD/JPY would end up aiming for the main channel support which will soon coincide with the 61.8% Fibonacci retracement level at 84.64.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
