Medium term
/
Buy
Trade view / 16 May 2017 at 1:02 GMT

NZDJPY could become a candidate for trade of the year

Managing Director / Technical Research Limited
New Zealand
Instrument: NZDJPY
Price target: ¥83.47
Market price: ¥78.40
Background

The New Zealand dollar remains under pressure after the market got caught out by a more dovish than expected statement from the Reserve Bank last week (see Kiwi slumps as RBNZ maintains neutral stance on monetary policy).
 
The only Kiwi dollar specific data point this week is tomorrow’s dairy trade auction. Futures pricing suggests another small price rise which would support NZD but not give it much of a boost.
 
In Japan we have industrial production and the first quarter GDP number. The growth number would have to beat expectations of 0.4% by a margin to independently influence JPY. Of late, the US 10-year bond yield has been the driving force behind USDJPY.

Management and risk description

For the past 20 months, NZDJPY has been forming a potential classical charting Inverse head and shoulders reversal formation; whereupon a sustained break above Neckline resistance (currently about ¥83.90) would yield a minimum upside objective of ¥97.40.

This upside potential (above) is complemented by NZDJPY’s “failed” multi-year head and shoulders pattern (which is already “in play”) with a long term target of ¥102.80 (see weekly chart below).

In the short term, support now lies at ¥78.00/¥77.60 and whilst this holds, the outlook is bullish, for rally toward ¥80.50; en route to pivotal ¥83.90 resistance in the days/weeks ahead. With such huge upside potential (especially relative to stop loss risk – see below) NZDJPY must surely be a candidate for (potential) “trade of the year” ahead.

Parameters

Entry: Today: NZ dollar is seen a buy at market (¥78.40) and again at ¥78.05, if seen .

Stop: just under ¥77.60, initially.

Target: 50% at ¥83.47 and the Balance at ¥97.37.

Time horizon: allow several weeks for first target to be met.

Daily NZDJPY chart
NZDJPY  Daily chart
















 Source: ThomsonReuters

NZDJPY Weekly Chart (click to expand)


















Source: ThomsonReuters 

For more on forex, click here.

— Edited by Robert Ryan

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2y
Patto Patto
Big Call Max ! I think I might join you on this one....Fingers crossed!
2y
Max McKegg Max McKegg
HUGE Risk:reward potential .. remember Patto, trading is All a numbers game in the end!
2y
Treve Treve
Brilliant Max, love this Payoff potential !!!!!
2y
seas seas
Yes, but what if the USA goes back to war with N. Korea? will Japan in the cross-hairs still be considered a safe haven?
2y
seas seas
I like this though, the NZD in general. The most beautiful country, far away from the madness and also, high tech is coming in a big way, New Zealand is in for some very big changes.
2y
seas seas
Gave it a shot here at 78.145
2y
Cat Cat
Morning Max. Interesting view. I'm going to take a look!
2y
marran marran
Well Max if this comes off you really are going to be a trading god!
2y
marran marran
im in at 78.146 so little downside to this trade as long as you don't go mad and over trade
2y
seas seas
Close to being stopped out. I never move stops but never say never?
2y
Vits Vits
Move your stop a bit lower if its not too late. It is reversing now and will shoot up very soon.
2y
Max McKegg Max McKegg
Always able to enter Trades but Stops are in place for a reason . It's ALL a numbers game at the end of each trading year
2y
Vits Vits
Yes, I agree Max. Im only talking about this specific trade, it will start moving up in a next few hours.
2y
Moot Moot
Max, you nailed the support at .7760. Seems very firm for now. Wading in long here. Love your analysis.
2y
seas seas
Yes, agreed. And it seems like it's held here at channel support. We could get a dip to 77ish however so my normal tight stops have been lowered.
2y
marran marran
stopped out
Max assuming you think the promise of the trade is still valid when would you re enter?
2y
seas seas
me to
2y
Max McKegg Max McKegg
So far, NZDJPY displays a corrective structure from 79.35 But must rally Now .. I've Bought again at 77.03 (with a tight stop under 76.80 initially). Needing to see real Strength to be content with this however.
2y
marran marran
im in again lets hope for a better day
2y
marran marran
i have my stop in at 76.78 and have to say its not looking promising at the moment
2y
marran marran
stopped out again
2y
Blange Blange
Appetite for safe haven JPY is too strong!
2y
seas seas
I hope some of you got back in for some upside! Not me but looking for a little pullback.
2y
seas seas
Max, I think it might be time to buy in again here. It looks to me like there is some heavy accumulation going on when the price dips a bit.

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