The New Zealand dollar rallied 1.52% against the yen to 92.80 and extended its gains after the Bank of Japan kept monetary policy steady. With oil prices remaining in bear market territory, BOJ Governor Kuroda continues to struggle creating inflation despite a moderate recovery and a pickup with exports. The BOJ is expected to maintain the annual pace of QE at 80 trillion yen for next year and that should provide a solid backdrop for further yen weakness.
Currently the NZD/JPY long-term bullish trend continues to remain intact. As long as the pair remains above the downward sloping trendline, further highs might be expected. To the upside, major resistance will come from the 94.00 handle followed by the 2007 record high of 97.75.
To the downside, critical support will come from the 89.67 – 89.96 zone which is the December low and currently where the 50-day SMA is trading.
The chart above displays a clear path for further upside momentum with the next major reversal spot potentially coming from a bearish ABCD pattern around the 95.05 or the 96.44 level.
The trade: Buy NZDUSD at 92.80 with a stop loss at 92.40 and a take profit at 94.40. The Risk/Reward Ratio is around 1:4.
Edward J. Moya