The New Zealand dollar has fallen rather sharply against the Japanese yen during trading on Friday. This has been a general “risk off” day as Wall Street got hammered due to lower than anticipated US economic numbers. Beyond that, there are concerns about the German economy, and a potential slowing of global growth. As this pair is highly sensitive to risk appetite, it makes sense that we find the pair lower.
The 200-day EMA is just below, and that should offer a bit of support. We also have a little bit of an uptrend line that sits right there as well, so we could be looking at a potential bounce. However, a break down below the 200-day EMA is obviously bearish, and it kicks off a potential rising wedge pattern which of course is bearish as well. At that point, it would make a lot of sense for the ¥75 level to be tested, and then perhaps a break down below there as we would reach towards the ¥75 level based upon the wedge.
If we do get a bounce, it’s likely that the market goes looking towards the ¥76.50 level, as we continue to see a lot of concerns around the world in general. With that concern, even if we do get a bounce it is going to be more of a “climbing a wall of worry” than anything else to borrow a phrase from Wall Street. Every time this pair has fallen, it appears that buyers are willing to step back in, showing signs of resiliency. Until we get the break down, one should assume that there is still demand underneath, although clearly Friday has rattled the nerves of investors around the world. All things being equal, the 200 day EMA will probably bring in mechanical trading system’s as well.
