NZDJPY Range Support (Sept 1, 2015)

A bounce off this area could lead to a move back to the top around the 78.50 minor psychological resistance.

The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside. With that, a break below the range support might even be possible, pushing NZDJPY lower by an additional 200 pips or the same height as the chart formation.

Stochastic is on the move up while RSI is on middle ground, indicating that there is enough buying pressure present to trigger a bounce. However, once the indicators reach the overbought region and turn lower, sellers could take control of price action.

Event risks for this setup include the release of Chinese PMI today, all of which indicated weaknesses in both services and manufacturing industries. Also lined up are retail sales and trade balance reports from Australia, which might be indicative of how New Zealand’s consumer and trade sectors could fare.

Apart from that, commodity price trends and market risk sentiment could push this pair around. Last week, declines in equity markets spurred sharp selloffs for the higher-yielding currencies, favoring the safe-haven yen in the process. A return of this type of market behavior could spur similar moves this week.

On the other hand, a return in risk appetite could mean gains for the Kiwi. The US is set to print its NFP reading on Friday and it might confirm whether or not the Fed could hike interest rates this year. Any signs that the tightening move might be delayed could keep risk appetite in the financial markets, as the global economy can count on extended stimulus from the US central bank.

By Kate Curtis from Trader's Way