New Zealand dollar trying to bottom against Japanese yen
In what can only be thought of as a good sign for global growth, the New Zealand dollar has turned around during trading on Wednesday at the 50 day EMA. That is especially interesting considering it’s against the Japanese yen. We recently seen a surge higher by the Kiwi dollar, so if we are going to see a pop against a “safety currency” such as the Japanese yen, it should probably be here.
Top of consolidation
We are currently at the top of the consolidation box as marked on the chart and turning around right at the 50 day EMA. With that being the case it’s very likely that traders are starting to see whether or not this recent surge higher is the real thing. As we have already broken out of the consolidation area and are now coming down to retest that area for support, this could set up for a great trading opportunity. Beyond that, we also have a gap above which could act as a potential target.
The fact that the daily candle stick is starting to form a hammer is not lost on me, and I recognize that a lot of traders uses reversal signal to get involved in the market. Sometimes you need an obvious signal to get everybody else to jump in. After all, it is a bit counterintuitive to think about buying risk right now, but it seems as if traders are starting to think to do just that. After all, this may be a situation where you “trade what you see, not what you hear.”
That being said, if we were to break down below the hammer, it would be a very negative sign and probably send this market looking towards the bottom of the consolidation area which is closer to the ¥70 level. That would be an easy trade to take as well, because it would show a complete failure by the bullish traders to take this market higher.
The main take away
The main take away here is that we are at an inflection point. While liquidity could be an issue over the next couple of days, as the Americans are away for Independence Day, there is a relatively binary trade here. If we can break above the top of the daily range, this market more than likely will try to go higher and fill the gap. Alternately, if we can break down below the bottom of the hammer, the market is very likely to go down towards the ¥70 level. In other words, it’s simply a matter of waiting to see what the market does and reacting in the appropriate manner.
Yes, it’s very difficult to get overly optimistic with all that’s going on around the world, but quite frankly by the time the rest of the world shows optimism, you will have already missed most of the move. Ultimately, this could be one of the more intriguing markets to trade over the next couple of weeks.