Catching the NZJ/PY Down trend

Catching the NZJ/PY Down trend

By: James Ansher | Where To Trade | On:15-10-2014 13:26
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Key Highlights

  • Preceding uptrend has officially ceased
  • Major Support and resistance levels
  • NZDJPY technical characteristics and volatility
  • Technical indicators
  • Perfect Short entry scenarios

 

NZDJPY 

Since the NZDJPY cross broke out of its multi month range in December 2012, we have seen the pair steadily appreciate over 20000 points. The first major consolidation was over a two months period about half the length of the whole up trend but eventually the pair was able to break to higher highs and touched its current yearly high at 89.09 on April.

Right now the pair has retraced over 600 pips and technical factor coupled with fundamental sentiment indicate that we are at the brink of a major trend reversal. For the bulls this is a perfect time to take profits and limit any long exposure. For the bears, it is a great time to look for a perfect entry as the down trend starts to take shape.

 

Major Support and resistance levels

Resistance levels

  • The furthest major resistance, 97.76 is the peak of the pair which was touched on July of 2007
  • The second resistance is at 89.90, the high of April which is also this year’s high
  • The closest resistance level is at 86.47 which is the high of April of last year

Support levels

  • The first major support is February’s low at 81.40
  • The second major support is the low of August of last year at 75.079
  • 69.10 is the final major resistance level, it is the high of March of 2012 and also the outer bound of the previous range.

 

Technical indicators

Monthly Chart

From the monthly chart, the 14 period moving average has been trading below the prices signaling that the uptrend was still intact. Last month however, we touched the bearish candlestick and failed to close below or above it.  The candle for the current month is bearish but still forming. The touching of the moving average and the candle sticks signal that the uptrend has ceased, it is time for the bulls to take profits. For a short entry signal however, we have to wait for the candle to close below the moving average.

 

Where To Trade - NZD/JPY Monthly 15-10-2014

 

The Stochastic has just entered oversold conditions and is currently reading 18.11. This indicates that the bears could potentially get exhausted in the future; we can thus anticipate some significant buying pressures especially at supports. The RSI is giving a neutral reading at 56.17 we can take this as a trend continuation signal and look for the price to continue in the long run.

 

Weekly Chart

From the weekly chart, the 14 period moving average has moved back to trade above the prices. This is a bearish signal that the current bearish momentum has picked up in the medium term. Given the pairs volatility however, we cannot take a long term short position based on the signals from this timeframe alone. We still need conformation form the monthly chart that a down trend is in pay.

Where To Trade - NZD/JPY Weekly 15-10-2014

 

The stochastic at 9.41 has entered the oversold regions this indicates that the bears are likely to get exhausted. The RSI at 34.83 indicates that wear not yet in the red.  Any short term reversal will there for be temporary.

 

Daily chart

Form the Daly chart the 14 period moving average is trading above the candlesticks indicating that the short term down trend is likely to continue. The stochastic and the RSI on this time frame are both giving neutral readings at 22.35 and 35.95 respectively.

 

Where To Trade - NZD/JPY Daily 15-10-2014

 

Wrap up

The technical indicators show that the NZDJPY is at the brink of a long term reversal. We are anticipating that the bearish cross will complete at the close of this Month’s candle. This will give us the signal to go short. Based on the volatility on this pair we cannot make entry trade based on signals from lower timeframes.

James Ansher

James Ansher

When there is a will there is a trade

A successful Forex trader and expert advisor

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