- The New Zealand dollar, as you can see, has rallied rather significantly against the Japanese yen during the trading session on Monday as we have cleared the 50-day EMA.
- At this point, we are running into a bit of resistance in the area of 87 yen, and it will be interesting to see whether or not we can continue to move to the upside.
Overstretched?
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As things stand right now, it certainly looks like we've gotten a little overstretched over the last couple of days, but this is a powerful move. So, I'm still in the camp of wondering whether or not this might actually end up being some type of trend change. Remember, everybody's talked about the Japanese yen strengthening and how great everything is in Japan with inflation picking up and the fact that the Bank of Japan may have to actually raise rates, something they're not typically known to do, has made the yen a little bit more palatable.
That being said though, the Bank of Japan meeting this week should not feature a rate hike and people will be paying close attention to that press conference. I suspect that what we're seeing here may not necessarily be strength in the New Zealand dollar itself, but maybe, just maybe, the idea that traders are coming in and they are short covering because of the real possibility of seeing extreme volatility.
If we can break above the 88 yen level, then I think at that point in time, I might be a little bit more convinced for a longer term move. But as things stand right now, this is a market that I believe continues to see more upward momentum and perhaps more of a buy on the dip attitude going forward. The 83 yen level is a significant support level going back many years. So, to bounce from here and to get a little bit of a movement to the upside would not be a huge surprise. We'll just have to wait and see how that plays out. But I do believe at this point, it's going to be difficult to short this market unless of course we get some type of price action on a daily close that tells us to.
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