The New Zealand dollar increased its value by 20% against the Japanese Yen (NZD/JPY) from 55.00 to 66.00 in less than a month. Afterwards it started consolidating sideways as seen in the 4-hour chart above. In the process, there could be a bullish setup particularly a 1-month symmetrical triangle forming which could propel this forex pair to rise once more.
My next for pick for the day is the Australian dollar against the Japanese yen. This forex pair broke out from a 3-week double bottom formation the other day as seen in its 4-hour chart above but hasn’t continued its swing up. It actually went back down after finding some resistance at 89.59.
The Japanese Yen weakened for a second session against all of the major currencies in a move that many traders suspect is renewed selling pressure from the Group of Seven nations. Following a downward spike on Thursday to 76.37, the G-7 was asked to intervene in an effort to curb the Yen’s appreciation and help support the devastated Japanese economy.
Coordinated Intervention Sends USD JPY Sharply Higher
After a break to nearly 76.00 on Thursday, the USD JPY rallied overnight after the Group of Seven nations agreed to take steps to curb the Japanese currency’s rapid rise. The wave of coordinated intervention by the global financial powerhouse also known as the G-7 is an attempt to stabilize the Yen and bring it back to more respectable levels following the post-earthquake rally.
Repatriation Likely to Trigger Break in USD JPY through 80.24
Japanese equity markets dropped sharply lower early Tuesday driven by panic selling investors after Prime Minister Naoto Kan said a “substantial amount” of radiation was leaking from a nuclear power plant. The weakness in Japan spread all over the world, sending some global markets to multi-month lows.
After hitting a low of 81.08 last February 4, the USDJPY pair has rallied back to mark a high of 83.97 2 days after Valentine’s day. It appears, however, that US dollar’s push against the Japanese yen is starting to lose some momentum. As you can see from its 4-hour chart above, the pair has formed what looks to be a head and shoulders pattern with a neckline at around 83.10.
This week the USD JPY confirmed last week’s closing price reversal bottom with a follow-through rally to the upside. The primary catalyst behind the Dollar/Yen rally was the interest rate differential. Treasury Bond yields rose this past week while Japanese rates held steady. The increased spread helped draw investors into the Dollar.