NZDJPY could be done with its selloff, as price formed a double bottom on its 4-hour time frame and has broken above the neckline resistance at 78.00.

Price has yet to climb above the 200 SMA dynamic resistance as additional confirmation of bullish momentum. The 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside or that the selloff is still likely to resume.

RSI is also heading down after briefly testing the overbought zone, suggesting that sellers are eager to return. Stochastic also looks ready to move south, reflecting a pickup in bearish pressure. If that’s the case, NZDJPY could dip back to the lows at 76.00.

If bulls stay in control, the pair could climb by the same height as the chart pattern or roughly 200 pips.

There are no major reports out of New Zealand for the rest of the week, so this pair might take cues from overall risk sentiment. In particular, risk appetite could drive up demand for the higher-yielding commodity currency while risk-off flows could draw traders towards the safe-haven yen.

Earlier today, Japan printed mixed economic figures, with both the preliminary industrial production figure and BOJ core CPI beating expectations. The former climbed by 7.2% versus the projected 4.9% figure while the latter improved from 0.6% to 0.8% instead of dipping to 0.5%. However, the jobless rate fell short of estimates as it climbed from 2.7% to 2.8% instead of holding steady.

Profit-taking could also impact NZDJPY price action towards the end of the year, as traders close the books on their latest positions. The low liquidity environment could bring about volatile movements, especially if there are any major headlines that impact sentiment in the next few days. So far, the attention has been mostly on the Omicron variant and efforts to curb its spread.