NZD/JPY pressing resistance area
The New Zealand dollar has reached towards the ¥72.25 level during the trading session on Thursday, which has been the scene of resistance in the past. At this point, it looks as if the market is trying to break out but failure is already starting to show itself as well. That being the case, the next trade in this pair could be setting up over the next 24 hours or so.
Heading into G 20 weekend
Remember, we are heading into the G 20 weekend, and it’s very likely that traders are going to be focusing on whether or not the United States and China can come to some type of terms. Quite frankly, that seems to be very unlikely so more than likely what we are going to see is some type of selloff in riskier currency pairs such as the New Zealand dollar versus the Japanese yen. The Japanese yen of course is a safety currency and it’s hard to believe that a lot of people will be wanting to hang onto risk going into a wildcard such as the meeting this weekend.
One also would have to worry about inertia if you are bullish of this pair. After all, we had seen a massive move during the previous session right into resistance, and that suggests that there may or may not be people willing to jump into this market now. If there isn’t, then this level will certainly hold as resistance. I think at this point if we can pick up more inertia and finally break out above the ¥72.25 level, then we could go a bit higher but right now it’s hard to imagine that happening ahead of the weekend. Quite frankly, it’s probably the exact opposite: people will start to flatten their positions therefore giving a slightly negative bias.
US/China means everything
As far as this pair is concerned it’s going to be about the Chinese economy. Remember, New Zealand is highly sensitive to global trade as it is a commodity based economy, and much like Australia. (Having said that, New Zealand is based more upon agricultural while Australia is based more upon hard assets such as copper or gold.)
The reality is that this market may simply creep around this area and drop a bit, then wait to see what happens over this weekend. That means that if we get some type of major break out it could be on Monday, and not necessarily over the next session or two. That being said, it is a very important level to watch. Obviously, it can work in the opposite direction as well, so if we break down below the bottom of the candle stick during the trading session on Thursday, then the market probably going to drift down towards the ¥72 level. Keep in mind that this pair is highly sensitive to risk appetite, which of course is waxing and waning around the world due to a plethora of issues. Without some type of positivity coming out of the trade talks, I just don’t see this market being able to rally significantly.