NZD/JPY Targets Lower as Downward Pressure Intensifies

Market Overview

On Friday, the NZD/JPY pair continues to feel the impact of broader market trends. While the U.S. dollar weakens against other major currencies, the Japanese yen has received support from hawkish comments by Bank of Japan policymakers. Naoki Tamura, a member of the central bank’s policy board, expressed concerns about the risk of rising inflation on Thursday, strengthening the yen. On the other hand, weak economic data from China and the likelihood of two more rate cuts in New Zealand have placed pressure on the New Zealand dollar. Although Chinese officials are making efforts to speed up economic recovery, the yen continues to outperform the Kiwi.

Technical Analysis

On the one-hour chart, NZD/JPY shows a clear downward trajectory, characterized by lower highs and lower lows, all trading below the moving averages. Sellers recently broke below the short-term support level of 86.989, driving the price toward the first key support derived from the 127.2% Fibonacci extension of the last upward swing, located at 86.890. Should the bearish momentum persist, breaking through this crucial level will open the path to lower targets for sellers. The next potential support levels are 86.764, followed by 86.625, and finally 86.400.

Oscillator Confirmations

RSI: The Relative Strength Index (RSI) is currently in the bearish zone, reflecting a strengthening of selling pressure.

MACD: The MACD indicator is aligned with the downward trend, as the histogram continues to show negative momentum, confirming bearish sentiment.

Moving Averages: Both short-term and long-term moving averages point downward, reinforcing the overall bearish outlook for NZD/JPY.

Alternative Scenario

However, if buyers manage to defend the 86.890 support level, the pair could stage a recovery. Key resistance levels include the recently broken 86.989 level, followed by 87.128 and 87.353, where the moving averages form a cluster of resistance. A sustained move above these levels would indicate a shift in momentum, requiring buyers to break above the previous highs to confirm a reversal toward an upward trend.

Key Levels Overview

• Resistance Levels:
  • Resistance 3: 87.353
  • Resistance 2: 87.128
  • Resistance 1: 86.989
  • Current Price: 86.889
• Support Levels:
  • Support 1: 86.764
  • Support 2: 86.625
  • Support 3: 86.400

Key Events to Watch

The release of the latest Purchasing Managers’ Index (PMI) in New Zealand, which exceeded previous readings, provided some stability to the NZD. However, better-than-expected industrial growth in Japan has further bolstered the yen’s strength against its Oceanic counterparts. Next week’s reports on China’s money and debt markets, given China’s status as New Zealand’s largest trading partner, could significantly influence the New Zealand dollar’s trajectory.

Conclusion

NZD/JPY remains under downward pressure, with the pair currently testing key support at 86.890. A breakdown below this level could see prices falling to 86.764, 86.625, and possibly 86.400. On the other hand, a recovery will require buyers to break above 87.128 and 87.353 to invalidate the bearish outlook. Keep an eye on upcoming data from New Zealand’s key trading partner, China, which may provide further market direction for the New Zealand dollar.

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