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Short-term trading idea: FX NZDJPY - a lowering game: support broken through at ¥80.45

Trading opportunities on the currency pair: On Friday, buyers gained a foothold under the minimum 80.45 from 23/02/16. A double top offers a good opportunity for taking a short position. The target for this forecast is ¥78.41 (61.8% from the range ¥80.45 - ¥83.81). I'm allowing for a fall in the NZD/JPY rate to the TR trend line at ¥78. This fall will not happen if the upper boundary of the A-A channel is broken through.

Background:

The previous trading idea on this currency pair was published on the 4th of May 2015. At the time of writing, the pair was trading at ¥90.51. After the trend line was broken through on the NZD/USD currency pair, a similar breakthrough was expected on the NZD/JPY pair, with a target of ¥87.27. The trend line was broken through on the 6th of May, and the target reached on the 11th of June. By the end of August, the kiwi dollar had fallen to ¥72.42.

Current situation:

As of now, a bearish signal has appeared on the daily chart; the price has broken through the ¥80.45 level. The kiwi dollar has been in a sideways trend since the middle of December. After an unsuccessful attempt at breaking through the ¥83.74 level on the 27th of January this year, bulls started closing their long positions. Finally, as the rate dropped below ¥81.20 (first confirmation), a double top formation appeared. On Friday, sellers moved the minimum of ¥80.45 on 23/12/16 to ¥80.16.

The double top provides a nice opportunity to take out some short positions. My forecasted target is ¥78.41 (61.8% from the range ¥80.45 - ¥83.81). As an intermediate target, we have ¥79.55 (27.2% from the range ¥80.45 - ¥83.81).

The Reserve Bank of New Zealand (RBNZ) took a neutral tone in their last sit-down. Their press release gave no hints about a softening of monetary policy, but neither did it say anything about tightening. The RBNZ is still concerned about a high kiwi dollar, so the central bank is unlikely to raise interest rates until the parliamentary elections to be held on the 23rd of September. Talks about a rate hike will only begin after this.

I'm allowing for a drop in the NZD/JPY rate to the trend line TR at ¥78. However, this scenario will not play out if the upper boundary of the A-A channel is broken through.

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