By Dan Eduard – After a prolonged upward trend, NZD/JPY may be poised for a downward correction. This analysis is based on a number of technical indicators, which show that the pair is currently in overbought territory.
For this analysis, we will be using the ForexYard daily chart for NZD/JPY. The technical indicators used are the Bollinger Bands, Relative Strength Index (RSI) and Stochastic Slow.
1. As seen in the chart provided, the price ticks are currently trading right on the upper Bollinger Band. Traders can take this as a clear indication that the pair is approaching overbought territory, meaning a downward correction is probable.
2. The RSI clearly shows the pair well above the upper resistance line, and has been there for some time. Not only does this show that the pair is overbought, but it also tells us that it has been trading at this level for an extended period. Traders can take this as a sign that prices may drop soon.
3. The Stochastic Slow shows a bullish cross forming just above the upper resistance line. This is further corroborates that the pair has finished its upward movement, indicating that it may be a good time for traders to enter into sell positions.
Forex Market Analysis provided by Forex Yard.
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