Technically speaking I still like the pair higher from here, and am targeting a move to 1.0930. I will look to re-enter longs at 1.0750, with a potential stop at 1.0635 (just under the March 27).
I would also look at AUD/JPY longs and feel this could still squeeze 200 pips to the upside over the coming weeks.
Looking at the daily chart, the pair has broken the longer-term downtrend and has also closed above the neckline of the inverse head and shoulders pattern, the target of which is 1.0930. Yesterday we also saw a bullish reversal pattern, with the pair trading below Tuesday’s low, but closing firmly above. This suggests the bulls are in control and a hint that dips remain a buying opportunity.
The MACD (on the daily chart) has moved above the zero line showing better trending conditions; the fact it continues to pull away shows good momentum behind the trend. Stochastic indicators are elevated and are a reason behind why I am keen to buy pullbacks at 1.0750 – just above the 38.2% retracement of the recent 1.0645 to 1.0810 move. The hourly chart shows this retracement as a good entry point.
Fundamentally the NZD is still fairly over-owned, and yesterday’s poor dairy auction was the key reason behind the Kiwi’s weakness. This was the fourth poor auction in a row. Today’s February retail sales and trade balance could be a reasonable catalyst for the pair as well.