NZDJPY Makes a Bearish Cross below the 86.00 Level
- Break below trend line
- 14, 21 Moving averages make a bearish cross
- Stochastic out of the oversold territory
- Multi timeframe Technical analysis
- Bears to resume driving prices
The NZDJPY has been on a major uptrend since the last week if August 2013, the moving averages signaled the commencement of the up trend when the 14 period moving average and the 21 period moving average managed to cross below the candle sticks and a full candle closed above them on the first week of August 2013. We got the confirmation of the trend when the moving averages made a bullish cross on the second week of November 2013.
The up trend was supported by a trend line that it touched thrice at its troughs on the last week of August 2013, the first week of February 2014 and the last week of May 2014. However we managed to break below the trend line on the third week of July this year where we saw a 100 pip sell off. That previous up-trend line is now acting as our resistance. Price was rejected 400 pips below it. We are now well below the 86.000 major psychological level and prices are retesting whether we can get above that level again. From the daily chart it is clear that that the prices have experienced consistent rejection neat the 86.00 major level. We do not anticipate to break above it.
From the weekly charts, we get our main technical signal of the next direction that the pair will be taking in the medium term: Both the 14 period and 21 period moving averages are trading above the prices. This is a bearish indication that the bears are in control of the market prices. We should also notice that as of last week, despite the indecision dhoji candle formed and the opening of the current bullish candle, the 21 period moving average made a bearish cross above the 14 period moving average. This represents a confirmation of the down trend that is taking shape. We should therefore be anticipating the prices to take a major bearish dive as soon as they near the present major resistance at the 86.00 level.
We should also notice that the 12, 26 MACD has been consistently making lower lows and thus signaling a reversal in the uptrend is imminent. The histogram from the MACD is now at -0.45 (negative 0.45) below the neutral zero line.
The stochastic at, 37.4, has moved out of the oversold region and indicates that we are now at neutral territory. This is an indication that the bears can resume driving down the price with ease. The RSI at 44.27 indicates that we are at neutral territory.
From the daily chart the 14 period and 21 period moving averages are maintaining their bearish cross however, they have touched the candle sticks which is a potential signal that a reversal may be taking shape.
From the price action we can see that the price has been rejected below the 86.00 level and is currently trying to retest that level.
The Stochastic at 80.6, has just touched the overbought region. We can thus anticipate a short term price rejection at the 86.00 resistance and a potential resumption of the major down trend. The RSI however, at 51.9, indicates that we are at neutral conditions.
The NZDJPY has a bearish bias on the larger time frame. The moving averages have given a bearish signal that can serve as a potential entry. In the daily charts, we are at overbought conditions and approaching a strong resistance level. Under this conditions a great strategy would be to short the pair just below the major level.
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Simon Furman is one of the best financial analyst with 27 years of trading experience
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