NZDJPY formed lower highs and found support around the 71.60 level to create a descending triangle pattern on its 1-hour time frame. Price is testing support at the moment and might be due for another bounce to resistance around 71.90.
The 100 SMA is still below the longer-term 200 SMA, though, so the path of least resistance is to the downside. In other words, resistance is more likely to hold than to break. The 100 SMA also lines up with the triangle top to add to its strength as a ceiling, but a break above this could spur a rally that’s the same height as the triangle pattern.
Similarly a break below the triangle support could set off a drop that’s around the same size as well. This pattern spans 71.60 to around 72.80, so the resulting rally or drop could be around 120 pips tall.
RSI was on its way down to indicate that selling pressure is in play, but the oscillator also seems to be pulling up to suggest that buyers are putting up a fight. Stochastic is pointing down to indicate that buyers are taking a break and allowing sellers to take over. This oscillator has plenty of room to head lower, so bearish pressure could stay on.
The Kiwi is on weaker footing on account of the RBNZ interest rate cut and the possibility of another one later in the year. In addition, resurfacing trade war troubles are weighing on the higher-yielding and commodity-dependent New Zealand dollar while at the same time propping up the safe-haven yen.
Looking ahead, the presence of trade uncertainties could weigh the Kiwi down further, especially if both the US and China wind up imposing more retaliatory measures on each other. On the flip side, renewing their truce could allow talks to proceed with less tensions and possibly revive risk appetite as well.