Short-Term Bearish Pressure on NZD/JPY as Price Hits One-Month Low

Market Overview

The NZD/JPY pair faces renewed bearish pressure as global economic uncertainty and geopolitical tensions drive investors towards safe-haven assets like the Japanese yen. Historically, the yen tends to strengthen during periods of heightened economic and geopolitical uncertainty, which has been the case recently as risk-off sentiment has increased. The yen, recognized as a safe-haven currency, gains favor in times of market instability, leading to the current downward movement in NZD/JPY.

Technical Analysis

In the four-hour timeframe, NZD/JPY recently broke below its modest upward channel, now trading under both the 100-period and 34-period moving averages. This breakdown, coupled with the subsequent failure to regain these levels, confirms the bearish outlook. A strong bearish candle formed, highlighting seller dominance in the current market. The price is now approaching a significant support level at 90.242. If this support is breached and the price consolidates below it, further downward movement is expected. Key support levels to monitor on the downside are at 89.993, 89.862, and 89.675, with a final bearish target at 89.325 if selling pressure persists.

Oscillators Confirmation

Momentum oscillators support the bearish outlook. The RSI currently reads 36.57, indicating that selling pressure remains strong and is approaching the oversold territory. This suggests that while the pair may see a brief respite, the bearish trend likely has more room to run. The MACD is also in negative territory, with the signal line crossing lower, further indicating that the bearish momentum is gaining traction. Both oscillators align with the overall downward movement and suggest that the pair remains under pressure.

Alternative Scenario

A reversal in the bearish outlook would require the pair to break above the recent high, which coincides with the 34-period moving average. Such a move would signal diminishing bearish momentum and potentially indicate a shift towards a bullish trend.

Key Support and Resistance Levels

Resistance Levels:

• 91.159 – Significant resistance if momentum shifts positively.
• 90.592 – Level to monitor for potential bullish reversal.

Support Levels:

• 90.242 – Key immediate support, testing critical market sentiment.
• 89.993 – Further support should bearish momentum continue.
• 89.862 – Additional downside level if selling pressure sustains.
• 89.675 – Potential support in a continued downtrend.
• 89.325 – Target level if the bearish trend persists.

Key Events to Watch

Looking ahead, several key economic events in Japan could have a significant impact on the yen. On Wednesday, November 20th, Japan will release its adjusted trade balance data. Projections suggest a reduction in the trade deficit to -0.15 trillion yen from the previous -0.19 trillion yen. A reduction in the trade deficit could be interpreted as positive for the yen, suggesting an improvement in Japan’s export performance. Additionally, annual export data is expected to show a 2.2% increase, contrasting with the previous contraction of -1.7%. This could further bolster the yen’s strength, reflecting improving external demand for Japanese goods.

On Friday, November 22nd, the National Core CPI data will be released, with expectations set at 2.2%, down from the prior 2.4%. A decline in inflation could signal reduced inflationary pressures, which may suggest the need for continued easing by the Bank of Japan (BoJ), potentially weakening the yen. Moreover, the Services PMI for November is expected to post a reading of 49.7, indicating contraction in the services sector, which could weigh further on the yen.

Considering these data releases, if Japan’s trade and export numbers outperform expectations, there is a strong likelihood of yen appreciation. However, if inflation weakens and the Services PMI falls below expectations, the yen may come under renewed selling pressure. The overall market environment suggests a mixed outlook, with both supportive and challenging factors at play for the yen, contributing to potential volatility in the NZD/JPY pair.

Conclusion

NZD/JPY remains under short-term bearish pressure as global risk aversion favors the Japanese yen. The pair has breached key support levels, with further declines likely unless a significant technical reversal or unexpected supportive data emerges for the New Zealand dollar or against the yen.