NZD/JPY traded higher on Tuesday after it hit support near the 77.20 level overnight. However, the rate hit resistance near 77.80 and then it retreated. The pair is trading above a prior downside resistance line taken from the peak of the 13th of April, and also within a new short-term upside channel that’s been containing the price action since the 29th of May. All these technical signs keep the near-term outlook somewhat positive.
However, given the bulls’ inability to aim for a healthy higher peak today, we prefer to wait for a clear break above 77.80 before we get confident on the continuation of the recent short-term uptrend. Such a break is possible to see scope for extensions towards our next resistance territory of 78.40. If that zone fails to prevent the bulls from driving the battle higher, then we could see a test near 78.75, a resistance area marked by the peaks of the 18th and 19th of April.
Shifting attention to our short-term oscillators, we see that the RSI stands above 50, but has just turned down, while the MACD lies above both its zero and trigger lines. Both these indicators detect upside speed, but the fact that the RSI has turned south adds to our choice to wait for a move above 77.80 before we get more confident that NZD/JPY could trade north for a while more.
On the flip side, a clear and decisive dip below 77.10 could signal the downside exit of the aforementioned short-term upside channel and would force us to abandon the bullish case. Such a dip could pave the way for the 76.70 support. That said, in order to start examining whether the outlook has turned back bearish, we would like to see a clear move below 76.60. This could confirm the completion of a double top pattern on the 4-hour chart and is likely to initially aim for the 76.30 barrier.
