NZD/JPY found support at 86.67 this week. The 1H Chart shows the pair inching its way up to about 87.58 before finding resistance. The 1H chart also shows a bearish divergence, and the market is indeed falling after this near-term reversal signal.
A break below 87.00 is likely a sign of bearish continuation, especially if the 1H RSI falls back below 40. But even before a break below 87.00, we might want to consider shorting the NZD/JPY around 87.40.
NZD/JPY 1H Chart 7/31
The 4H NZD/JPY chart shows a falling trendline connecting 89.56 and 88.37. If the recent bearish trend is to continue, holding below the 87.50 area would be key. So far, even though there was some breach of this trendline and the 87.50 level, price has immediately retreated below it.
The 4H RSI came up to 60 and is turning down. After tagging 30 earlier last week, being able to hold below 60 is a sign that bearish momentum is maintained. The RSI also offers a negative reversal signal. This refers to higher RSI high, corresponding with a lower price high. This suggests another low is pending.
NZD/JPY 4H Chart 7/31
With that in mind, there is a downside risk below 86.75. The 85.86 May-low could be the next key support. Let's say the target is then, 86.00. If price pops up above 87.70 , it is likely getting into a larger consolidation period, if not a bullish continuation. So, a stop can be placed at 87.85.
Let's assess a trade plan to short entry at 87.40. This stop placement and downside projection gives an entry at 87.40 a potential reward of 140 pips, and potential risk of 45 pips. This is a reward to risk ratio of around 3:1.
A break below 87.00 is likely a sign of bearish continuation, especially if the 1H RSI falls back below 40. But even before a break below 87.00, we might want to consider shorting the NZD/JPY around 87.40.
NZD/JPY 1H Chart 7/31
The 4H NZD/JPY chart shows a falling trendline connecting 89.56 and 88.37. If the recent bearish trend is to continue, holding below the 87.50 area would be key. So far, even though there was some breach of this trendline and the 87.50 level, price has immediately retreated below it.
The 4H RSI came up to 60 and is turning down. After tagging 30 earlier last week, being able to hold below 60 is a sign that bearish momentum is maintained. The RSI also offers a negative reversal signal. This refers to higher RSI high, corresponding with a lower price high. This suggests another low is pending.
NZD/JPY 4H Chart 7/31
With that in mind, there is a downside risk below 86.75. The 85.86 May-low could be the next key support. Let's say the target is then, 86.00. If price pops up above 87.70 , it is likely getting into a larger consolidation period, if not a bullish continuation. So, a stop can be placed at 87.85.
Let's assess a trade plan to short entry at 87.40. This stop placement and downside projection gives an entry at 87.40 a potential reward of 140 pips, and potential risk of 45 pips. This is a reward to risk ratio of around 3:1.
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