The NZD/JPY is currently in a pivotal phase, trading within a well-defined rectangle pattern since late September. This consolidation has seen the pair oscillate between a green horizontal support level at the bottom and a blue horizontal resistance level at the top. This sideways movement reflects indecision among traders, with neither buyers nor sellers able to dominate the market.
Earlier this month, we witnessed a false breakout above the blue resistance. While this initially seemed like a bullish breakout, the move was quickly reversed, creating a wave of negative sentiment. This sentiment drove the price back toward the lower boundary of the rectangle, testing the green horizontal support.
The green support zone is now a critical line of defense for buyers. Historically, this level has provided a foundation for upward moves within the rectangle. Buyers should feel relatively confident defending this level, and a bullish reversal pattern here—such as a hammer candlestick or a bullish engulfing—would signal a buying opportunity. If such a pattern emerges, the first target would be the blue resistance, offering a short- to mid-term trading opportunity.
However, should the price close a daily candle below the green support, the implications would be stark. A confirmed breakout below this level would likely trigger a strong bearish move, as traders interpret the breakdown as a signal of renewed seller dominance.