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Current Market Risk-Off Sets Up NZD/JPY for Further Downward Pull

If you have followed our recent trade of the day analyses, you would have noticed that we have sold the NZD against the USD, JPY and even the AUD and have had a 100% success rate all through. The Bearish sentiment on the beta-currency has still not changed and as risk-off sentiment is currently brewing on the back of heightened US-China trade war following the blacklisting of Hauwei by the US department of commerce; we are currently seeing a flight for safety to safe haven currencies such as the JPY. The aforementioned variables put the NZD/JPY as a plausible instrument to short!

Technically, price is trading off the near-term resistance area at the 72.10-72.35 price area (highlighted in lime) [seeH1 chart] – we can use this as a threshold for risk whilst we look to take profit at the next psychological level at 71.00 banking on the fundamentals that trade war escalation don’t ease out.

Fig 1: Hourly (H1) NZD/JPY Chart

NZD/JPY

Sell @ current market price (instant execution)

Stop: 72.460

Limit: 71.000

Alternatively, we think we are in a full-blown trade war underplayed by the media as Huawei have retaliated to its blacklisting by cancelling business orders with suppliers that are looking to comply with this ban. China is only defensive, so if the US slows down its offence, China would most likely do the same thus easing the heightened market risk. This can cause capital outflow from the JPY hence nullifying the above outlook. So it’s advisable that traders always use a stop loss.

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