New Zealand Dollar Likely To Pull Back Against Yen
Forex4you | Feb 18, 2019 11:07AM ET
The New Zealand dollar against the Japanese yen initially tried to rally towards the ¥76 handle early on Monday but has turned around completely as we are starting to see the New Zealand dollar show signs of exhaustion against many currencies around the world. With that being the case, it’s very likely that this pullback will show itself here as well.
On the attached chart, I have the Bollinger Band® indicator placed, which of course measures standard deviations from average price. We are in an overextended area, and the fact that we are forming a shooting star does, of course, suggest that we have selling pressure reentering the market. The ¥76 handle has been an area that has been both support and resistance in the past, so it makes sense that we would have a bit of a reaction here. Ultimately, I think that we are looking at a scenario that suggests a brief return to the 20-day SMA which is the middle line of the Bollinger Band® indicator, presently hovering around the ¥75 handle.
It’s interesting to see that the New Zealand dollar is showing signs of weakness over the last 24 hours as it is highly sensitive to Asian trade, and of course the U.S./China trade policy. At this point, I do recognize that there is a lot of clustering just below and near the ¥75 handle, so that’s why the downside might be somewhat limited. Beyond that, the moving average is sloping higher, which of course adds credence to the idea of a simple pull back instead of some type of massive selloff. However, if we were to break down below the ¥74 level, that could send this market even lower. All things being equal, this should simply be a pullback in what has been a nice move higher.
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