NZDJPY Ready to Break Lower?

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NZDJPY is trading sideways on its 1-hour time frame and price just tested support. A break lower could set off a drop that’s at least the same height as the range.

The 100 SMA is below the 200 SMA to suggest that the path of least resistance is to the downside or that support is more likely to break than to hold. Then again, the moving averages could simply be oscillating to reflect range-bound action. Price is below both dynamic inflection points, so these could hold as resistance moving forward.

RSI is pulling up without reaching the oversold region, suggesting that buyers are eager to return and push price back to the top of the range. Similarly stochastic is also heading north, so the pair could follow suit while bullish momentum is in play.

The RBNZ kept rates on hold at 0.25% as expected in this week’s monetary policy statement but warned that high exchange rate levels are dampening returns for exporters. RBNZ head Orr also touched upon the possibility of negative rates during the press conference.

There are no major reports due from the Japanese economy, so yen price action could depend mostly on overall market sentiment. So far, the focus has been on the uncertainty of US stimulus and clinical trials for the coronavirus vaccine. Positive developments on these fronts could be bearish for the lower-yielding yen.

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