November 23, 2021

Are Bulls Ready to Take Back NZD/JPY?

 We’ve got a major event ahead for the Kiwi this week, making the recent pullback in NZD/JPY one to watch as a few technical setups are now coming into play.

Are Bulls Ready to Take Back NZD/JPY?

Heads up forex traders because we’ve got a potential volatile week ahead for the New Zealand dollar with the latest monetary policy statement from the Reserve Bank of New Zealand on Wednesday.

Expectations are pretty high that the RBNZ will deliver a rate hike this week, given the record high inflation rates and warnings from RBNZ Governor Orr that this environment may be prolonged due to supply-chain issues and environmental factors.

Despite sending out this warning at the end of October, the Kiwi actually gave back some of the earlier October gains, suggesting that a hike is likely already priced in. That makes a “sell-the-news” scenario less likely if we do see a rate hike, making the longer-term trend higher in NZD/JPY an attractive play for the bulls if the current dip continues.

So, if the RBNZ does hike this week, we’ll be on the lookout for bullish candles patterns around current levels down to 79.00 before considering a long position. 79.00 is likely where we’ll see buyers start to hop in, but given the potential volatility may come, 78.50 wouldn’t be out of the question for a retest if volatility went far beyond the daily average true range of around 75 pips.

Another longer-term setup to watch out for in case of a rate hike is a break of the falling ‘highs’ pattern marked on the chart above. An upside break in the trendline with fundamental support would like in both long and short-term technical players trying to catch the momentum higher.

In the very off chance the RBNZ holds of on raising interest rates, we could see a  swift move to the downside, similar to Sterling when the Bank of England failed to meet rate hike expectations earlier in November. The 78.50 – 79.00 area would be an easy target to reach in this scenario, with 78.00 being likely reachable depending on what the RBNZ say during the press conference after the statement.

What do you guys think? Is NZD/JPY ready to get back to the longer-term downtrend if the RBNZ hikes?