NZD/JPY Price Analysis: Struggles at the 200-DMA, slumps towrads 77.30s

After printing a new weekly high at around 78.00, the NZD/JPY slumps as the Asian session begins, trading at 77.31 at the time of writing. Since Wall Street closed, market sentiment has not improved, as depicted by Asian equity futures indices mixed, fluctuating between gainers and losers.

During Thursday’s overnight session, the NZD/JPY pair jumped towards 78.00 as the market mood improved, once Fed’s monetary policy decision crossed the wires, which came as some investors expected. The US central bank decided to increase its QE’s reduction by $30 Billion beginning in mid-January 2022, while the dot-plot, which represents the 18 Federal Reserve members’ expectations of the Federal Fund Rates (FFR), foreseen three hikes in 2022. 

The market’s reaction to that initially was towards a stronger dollar. Nevertheless, the greenback’s move was faded, to the detriment of other safe-haven peers like the JPY, spurring a rally in US equities, while risk-sensitive currencies like the AUD and the NZD climbed. 

In the case of the NZD/JPY, the pair advanced sharply, peaking around 78.00, then retreated the upward move towards 77 flat, once market mood worsened throughout the New York session.

NZD/JPY Price Forecast: Technical outlook

The NZD/JPY daily chart depicts the cross-currency trading near a 13-month old upslope trendline, briefly pierced four times, though at the end respected by NZD/JPY traders, lying around 76.80s. The daily moving averages (DMAs) reside above the spot price, and in fact, the upward move was capped at the 200-DMA at 79.42.

From a market structure perspective, as long as it remains above the August 19 low at 74.55, the NZD/JPY is tilted to the upside, but in the near term it is downwards.

On the downside, the first support would be the upslope trendline around 76.80. A break of the latter would open the way for a test of the structure low around 74.55, but firstly crucial support levels would need to be broken. The next demand zone would be the December 14 low at 76.43, followed by December 3 low at 75.95, and then the July 20 cycle low at 75.26. 

Any dips could be viewed as an opportunity for NZD bulls, though cautions remain, as the NZD is subject to market sentiment, so-any risk aversion looming in the financial markets could spur some downside pressure on the New Zealand dollar.