In today's technical overview, we focus on the potential reversal developing across pairs with the Japanese Yen, as the Yen shows signs of weakening and attempting to correct its recent streak of strength. A particularly interesting example is New Zealand Dollar to Japanese Yen (NZD/JPY), where the technical setup is remarkably precise.
The price action on NZD/JPY reveals a well-defined channel down formation, marked with red trendlines. This pattern is textbook in its accuracy and provides an excellent framework for analyzing the pair's potential movements. Within this channel, we can identify a triple bottom formation, with the price now completing the third bottom. This structure, combined with technical indicators, suggests that a reversal may be brewing.
Both the RSI and MACD indicators are signaling bullish divergence, adding further weight to the case for a potential upside breakout. However, it's crucial to note that while the signs are promising, it's slightly premature to act just yet.
The definitive buy signal will be triggered when the price decisively breaks above the upper red trendline of the channel down formation. A daily close above this level would confirm the reversal and open the door for significant bullish momentum.
Until that breakout materializes, the trend remains bearish, as the price continues to trade within the confines of the descending channel. Traders should exercise caution and wait for confirmation before entering long positions.