BLOG | June 22, 2017

NZD/JPY Heading for a Price of No Return

There have been several indications technically that the NZD/JPY is overbought at this recent run-up price near 81.00. Traders who need a leg up in the market should pay close attention to this pair this week in my opinion. The monthly target has yet to be hit and it is a tempting trade indeed. Great risk versus reward abound in this short potential that has spent months building to the upside. In addition, there are no planned big interest rate changes planned, so the technicals should rule. Let’s take a look at the pair on the 2-hour chart and see if we might have what we need for a nice trade setup.

This chart has been running to the north for months, but what we need to pay attention to are the missed daily and new weekly targets that are pulling this market back to the downside on this chart. What we need is great risk versus reward though. I am not usually willing to point out an idea about a trade (that I am sharing) unless I am looking at a 1-to-4 or more in risk versus reward. As you can see, I have 1 live order in that is in profit and 1 that is currently down 47.5 pips.

As you can see, I have entries pending heading to the un-hit monthly target. We are about halfway through the month and I am willing to wait 2 weeks for a 250 pips trade in this market.  With a decent average trading range and good volatility in this pair, we may get there early. In addition, another reason why I like this entry below a price of 80.600 is that would confirm the formation of the right tip of the potential crown I found here on this next chart.

Again, that D extension on the right side of the crown goes right to the weekly target this week. I can’t tell you how many times I have seen a trendline get crossed and broken with this pattern… it must be in the 1,000’s now. Not to mention we have a need for a new pusher or catalyst in this market now that the central bank in New Zealand has set rates at 1.75 for a fixed term of time.

I really like these stacked in orders on this trade. However, I do not know the future and there is one potential hiccup in this setup. An un-hit monthly target from October 2016 last year. If we zoom out enough on this pair we see that there is a potential for a deeper pullback than 81.00. However, the risk in stop is well worth the reward on this trade in my opinion. Again, my stops are at 81.460 on EVERY order and my limit for each pending order is 78.054. I planned entries about every 40 pips once the daily target for TODAY gets hit at roughly 80.200. Once that price is hit this should run rather quickly.

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