I Expect NZD/JPY To Depreciate To 76.50

Although NZD/JPY is not directly connected to the USD the hiking of the US Federal Funds Rate did have an effect on that pair too. NZD/JPY reached a resistance and a local high at 76.869 and it could not overcome 76.90, beginning a depreciation. Yesterday the depreciation was 57 pips, but today, after the European Central Bank announced its interest rate, the pair retraced almost half of yesterday’s drop.

There are two possible scenarios for further development:

In my opinion, the priority scenario is for a renewal of the depreciation toward the next support at 77.00 – 76.90 and should the pair overcome that support there could be a drop to 76.50.

The alternative scenario is for a renewal of the move north from 76.50 – 76.30 to 79.00+.

It Appears That NZD/JPY Is Renewing Its Move To The Downside

The Reserve Bank of New Zealand interest rate remained unchanged, but the news alone about that were a powerful catalyst for a strong drop of the NZD against all other currencies.

After dropping for about 170 pips NZD/JPY reached a level which could technically be viewed as a diagonal support, and it could temporarily halt its descent.

If the pair breaks out below that trend line, however, the next support zone for the New Zealand currency is at 77.20 – 77.00.

Today is only Thursday, but we have to watch how the weekly bar will close – if the now forming bearish hammer is confirmed, we could expect the pair to continue its depreciation toward the local low at 75.50 in the medium term.