Recommendation: Short Position
Entry Level: Short Position @ 83.50
Hedge Level: Stop Buy Order @ 85.00 (Take Profit Level @ 86.00)
Take Profit Zone: 80.00 – 80.50
Stop Loss Level: 85.00 (We will not use a stop loss order and execute this trade as advised below)
The NZDJPY has bounced from its ascending support level which is marked by a blue as visible in the daily chart (D1). This currency pair is now trading at solid horizontal resistance levels which are marked in red. We expect the NZDJPY to start a correction which will lead to a breakdown of its ascending support level and take this currency pair back down to its horizontal support level marked in blue in the above chart.
MACD shows a negative divergence which is a bearish signal and the set of higher highs is not confirmed which makes the recent rally vulnerable to corrections. RSI has formed a negative divergence as well and additionally is trading in overbought territory with a downward trajectory. A breakdown from overbought territory should intensify the correction
We recommend a short position at 83.50 with a potential second entry level at 86.00. We also recommend a stop buy order at 85.00 with a take profit target of 86.00 in order to hedge our initial short position and before adding new short positions to this trade.
Traders who wish to exit this trade at a loss are advised to place their stop loss order at 85.00. We will not use a stop loss order and execute this trade as recommended. Place your take profit order at 80.50.
Here are the reasons why we call the NZDJPY currency pair lower:
- The NZDJPY has rallied from support levels and is now trading at horizontal resistance levels
- MACD has formed a negative divergence which is a bearish signal
- RSI has formed a negative divergence as well and is also trading in overbought territory with a pending breakdown which should intensify the correction
- Profit taking after a minor rally in order to realize trading profits at strong resistance levels
- New short positions by institutional swing traders