NZD/JPY traded lower during the Asian morning Wednesday, after it hit resistance slightly below the 74.45 barrier. The slide brought the rate below yesterday’s low of 74.20, and was stopped near the 73.84 zone, also marked by the low of February 8th. On April 18th, the pair broke below the lower end of the sideways range that contained most of the price action since February 13th, and subsequently it continued drifting south. In our view, this paints a negative near-term outlook.
We believe that the bears are likely to take charge again soon and perhaps aim for another test near 73.84. If they manage to overcome that obstacle this time around, then we may see them driving the battle towards our next support territory, at 73.40, which is slightly above the low of January 22nd. That said, before the next negative leg, sellers could take a break and allow the rate to rebound somewhat further. A break back above 74.20 could confirm the case for a corrective bounce and may allow a test near the 74.45 level, or even the 74.65 zone.
Both the RSI and the MACD detect downside momentum and corroborate the case for another round of declines. The former lies below 30, while the latter stands below both its zero and trigger lines. However, the RSI shows signs of bottoming within its below-30 area, an indication upon which we base our view for a possible corrective bounce before the bears jump back into the action.
However, in order to abandon the bearish case, at least in the short run, we would like to see a move back above 74.90. Such a move would bring the rate back within the aforementioned sideways range and may initially aim for the 75.10 zone, the break of which could trigger extensions towards the crossroads of the 75.50 level and the downside resistance line drawn from the high of March 21st.
