NZD/JPY gains as market sentiment show further signs of improvement
The pair is trading to its highest levels since 30 August as the kiwi benefits from improved risk sentiment in markets as well as the fact that China mentioned that they won't devalue the yuan earlier today. Meanwhile, the yen is among the laggards on the day as Treasury yields continue to stay elevated while equities are surging higher.
The pair is now moving past resistance from the 61.8 retracement level @ 73.99 and looks to be threatening a break of the daily support-turned-resistance @ 74.14. Near-term bias is more bullish and that will continue to underpin the pair unless a really negative headline hits markets unexpectedly.
The next key daily resistance levels to watch out for are the 76.4 retracement level @ 74.40 and the support-turned-resistance level @ 74.56.
But ultimately, the pair needs to hold a break above the downwards sloping trendline as well as the August highs in order to justify any further move to the upside. Otherwise, this will be a yet another similar story for NZD/JPY this year.
The pair managed to find some support earlier this month from August 2016 lows @ 72.22 before retracing higher on the back of more positive risk sentiment but the inability for buyers to break above the August highs of 75.05 would mean that the pattern of lower highs and lower lows will still remain intact.
And that would mean the bearish outlook for the pair will continue on. For the moment, that trade isn't well set up just yet as near-term bias remains more bullish. But if price breaks back below the 100-hour MA (as well as the 200-hour MA) before testing the August highs then the gains seen so far this month is very much a false dawn in the making.
