NZDJPY has shown increased downside momentum, as price broke below the bottom of the ascending triangle on its 4-hour time frame. The chart pattern is roughly 600 pips in height, suggesting that the resulting breakdown could be of the same size.
If the selloff carries on, price could head to the next support zone around the 90.00 major psychological mark and further on to the 88.00 handle. A pullback to the broken triangle support could still be possible if traders book profits off key support levels.
Stochastic is already deep in the oversold area, suggesting that a bounce is set to take place sooner or later. Shorting at market with a stop back above the triangle support could work for a breakout setup while waiting for a pullback to the 92.00 levels would be a more conservative entry.
Earlier today, reports of falling copper prices led to massive declines for the commodity currencies, particularly the Australian dollar. This carried over to the New Zealand dollar too, as the country is also heavily dependent on its commodity export industry.
There are no other event risks for this breakout trade for the rest of the day, as price action could be driven by risk sentiment. So far, the commodity price tumble is keeping risk appetite in check, which might mean more losses for the higher-yielding currencies and more gains for the lower-yielding Japanese yen.
US retail sales and import prices data are up for release later on and this might indirectly affect NZDJPY price action based on how it impacts overall market sentiment.
By Kate Curtis from Trader’s Way