NZDJPY is attempting to regain its positive footing after hitting a brick wall at the 200-day moving average (MA). Prices peaked at 71.24 – a 4-month high. Further gains are possible in the near term as, despite the softening in the bullish bias, the momentum indicators suggest there is scope for a continuation of the latest upswing.
The stochastics have come off overbought territory, but the %K line is in the process of turning higher. The RSI flatlined just below the 70 level so could yet cross into overbought area.
Should the bulls challenge the 200-day moving average again, the next resistance is likely to come from the 71.75 region, which is 78.6% Fibonacci retracement of the July-August downtrend. Further up, the focus would turn to the July top of 73.23, which, if broken, would reinforce the newly emerging bullish structure in the medium-term timeframe.
The shift to a bullish outlook was confirmed when prices breached above the long-term descending trend line in November. But should the 200-day MA prove a too strong obstacle to overcome, prices are likely to head back down to the descending trend line to test the key support region around the 50% Fibonacci at 69.76 where the 20-day MA also lies.
Failure to hold above this support would switch the short-term bias back to neutral, while a steeper decline that takes prices below the 50-day MA and the 38.2% Fibonacci at 68.94 would risk giving the bears the upper hand.
