USD/JPY in broad neutral trend; short-term bounce pauses at range-high
USD/JPY is in a broad neutral trend as the market remains trapped in a range between 108–114 during the past 8 months. In the short-term, the pair rose towards the upper end of the range but has found strong resistance and reversed back down from a high of 114.73.
The bullish phase from 107.31 has turned neutral with prices currently consolidating mostly in the 113-handle. Yesterday’s dip below 113 has found support at the 50-day moving average resulting in a bounce back to test this key level.
Prices need to move further above the key 113 level in order to ease immediate downside pressure. This level is important since it is the 23.6% Fibonacci retracement of the up-leg from 107.31 to 114.73. Failure to rise above it could result in prices threatening to break below the 50-day MA. A drop below the 200-day MA would bring further losses towards 111 (the 50% Fibonacci) and 110.15 (61.8% Fibonacci), moving towards the lower end of the range.
A rise above 114 would help USD/JPY gain upside momentum for a re-test of the 114.73 high and then from here the overall trend would turn bullish to target the next high at 118.66.
In the big picture, USDJPY remains range-bound on the daily chart but short-term price moves have been bullish and trend indicators are bullish after the crossover of the 50-day MA above the 200-day MA.
NZD/USD bias tilted to the downside
NZD/USD has a bias that is tilted to the downside during the past week, with trend indicators supporting this view. A bearish crossover of the 20 with the 50-period moving average on the 4-hour chart and an RSI below 50 are indicators of weakness in the market.
Looking at the broader picture, NZD/USD is in a downtrend and has been consolidating a decline from 0.7434 and pausing at a low of 0.6817 on October 27. The market has consequently been moving sideways and capped at the 23.6% Fibonacci level (0.6961) of the down-leg from 0.7434 to 0.6817. After several tests of this level, prior upside momentum was not sustained, and prices fell back down. The target is 0.6817, which if broken would increase downside pressure and confirm a resumption of the downtrend for a move towards 0.6674.
With upside momentum non-existent in the near-term, it would be quite a challenge to rise above what is key resistance at 0.6817. But if successful, the market’s focus would shift back to the upside to target the 0.7000 handle. But only a move above 0.7200 would invalidate the short-term downtrend.
EUR/AUD pauses strong rally; bullish but overbought
EUR/AUD has posted a strong rally over the week, flying from 1.5081 to a five-month high of 1.5605 (+3.50%) on early Wednesday. However, the pair paused its steep uptrend soon after as the market became overbought, retracing the 23.6% Fibonacci level of the aforementioned up-leg at 1.5480.
The short-term bias in the four-hour chart remains bullish given that EUR/AUD is currently trading above the 20 and the 50-simple moving average lines which have been positively sloping after they recorded a bullish cross on November 10. Moreover, the fact that the pair is far above the Ichimoku cloud gives another positive signal to the market. Yet, according to the technical picture, the risk is tilted to the downside as the RSI is still located in the overbought area above 70 and the MACD has slowed down below its signal line (both indicators are marginally below their neutral zones in the one-hour chart).
Should the pair extend its losses, the pair might head down towards the 38.2% Fibonacci at 1.5404 after it successfully breaches the 23.6% Fibonacci at 1.5480. Then from here, a violation of the 50% Fibonacci at 1.5343 would turn the bias neutral from bullish and shift the focus to the bottom of the uptrend to 1.5081.
Alternatively, if market actions drive the pair up, an immediate resistance is likely to emerge at the five-month high of 1.5605 before the 1.5700 and 1.5800 psychological levels come into view.
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