NZDJPY appears to be in the middle of a correction on its climb, as price is retreating to the Fibonacci retracement levels on the 4-hour time frame. Price is testing the 38.2% level already but might be due for a larger pullback.

In particular, the 61.8% Fib might be a strong area of interest since it lines up with the 79.00 major psychological mark and former resistance. The 50% level could also attract buyers since it coincides with the 79.50 minor psychological level and 200 SMA dynamic inflection point.

On the subject of moving averages, the 100 SMA is above the 200 SMA to indicate that the path of least resistance is to the upside or that support is more likely to hold than to break. In that case, if any of the Fibs hold, NZDJPY could resume the climb to the swing high at 82.57 and beyond.

Stochastic is also indicating oversold conditions or exhaustion among sellers, so turning higher would confirm that buyers are taking over.

Risk aversion has been weighing on higher-yielding currencies like the Kiwi this week, though, as stronger than expected US inflation puts the Fed closer to tightening monetary policy.

Note that the US central bank has already started tapering asset purchases, so they could be on track towards ending stimulus soon. This could mean some downside for businesses who rely on low borrowing costs.

There are no major reports due from New Zealand and Japan for the rest of the week, so NZDJPY might simply take cues from overall market sentiment. A continuation of risk-off flows might benefit the safe-haven yen in the near-term while a pickup in risk-taking could allow a bounce to take place.

A handful of mid-tier reports are due from Japan early next week, including their preliminary GDP and price index for Q3.