The NZDJPY cross is climbing within a well-defined upward channel, buoyed by central bank divergence and carry-trade flows, but momentum faces a key inflection point near resistance. The Reserve Bank of New Zealand (RBNZ) slashed rates to 3.25% in July and signaled further easing ahead as growth slows and trade uncertainty lingers. In contrast, the Bank of Japan (BoJ) remains broadly dovish but faces pressure to tighten later this year amid rising domestic inflation and political shifts. This divergence has supported NZDJPY carry positioning despite New Zealand's weaker fundamentals.
The pair trades around 88.20–88.30, with resistance looming at 88.70–88.90. A breakout above that range could extend gains toward the 90.00 mark, but traders are wary of overbought conditions as momentum fades.
Risk sentiment remains the wild card: shifting to risk-off could spark safe-haven demand for the yen, dragging NZDJPY back toward support at 87.10–86.00.
1. Divergent central banks & carry flows
The RBNZ cut rates to 3.25% in July, signalling further easing ahead amid slowing growth and trade uncertainty. In contrast, the BoJ remains dovish, but risks being pushed toward later hikes given inflation and political shifts. This divergence supports NZDJPY carry flows despite weaker NZ fundamentals.
2. Technical & price action
NZDJPY is trading around 88.20–88.30, within an upward-sloping channel from recent rebounds off ≈86.00 support. Resistance near 88.70–88.90, and a break above could target 90.00. But sentiment is turning cautious: trading ideas warn of approaching overbought zones at ~88.90.
3. Risk sentiment & macro positioning
A shift to risk-off tone would benefit the JPY as a haven, capping upside for NZDJPY. Neutral to negative sentiment favors short positioning as fundamental pressure on NZD and supports JPY strength.
Summary:
NZDJPY is channeling higher but faces resistance near 88.70–88.90. A sustained push above that may reach 90.00, while failure risks a pullback to 87.10–86.00. Key catalysts: RBNZ commentary, BoJ policy updates, and global risk sentiment shifts.
NZDJPY – H4 Timeframe
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On this NZDJPY 4-hour chart:
Price retested a key horizontal resistance zone twice (near 89.20) but failed to break higher, forming a double top pattern that led to a sharp pullback.
After the rejection, the price dropped and is now heading back toward a well-defined demand zone between 87.50 and 87.80 (highlighted box).
This demand zone also aligns with the 200-period moving average (red line) and the last bullish order block, creating a strong confluence area.
If buyers defend this level, the pair could resume its bullish momentum, as the long black arrow pointing upward suggests.
My Trading Plan:
I'll wait for price to reach the 87.50–87.80 demand zone.
If a bullish candlestick reversal (bullish engulfing, hammer, or rejection wick) forms within the zone, I'll consider taking a long trade.
Direction- Bullish
Target- 88.818
Invalidation- 87.374
CONCLUSION
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