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  • NZD/JPY has been whipsawed into positing for a high probability setup.
  • A 1:3 risk to reward opportunity has appeared on the 4-hour chart from weekly analysis. 

NZD/JPY is ripe for a swing trading opportunity to the downside for a 1:3 risk to reward ratio and high probability setup. 

That being said, giving the holiday thin trading conditions, it would be prudent to trade at reduced risk considering the volatility.

The hard fundamentals in covid developments and Brexit headlines that have been whipsawing price action make trend trading purely technical analysis somewhat futile in practice. 

Nevertheless, the following is a top-down analysis that illustrates where the next trading opportunity lies.

Monthly chart

The reverse head and shoulders is a bullish pattern and considering the market has already retraced to a 38.2% Fibonacci level, the upside beyond resistance are compelling. 

That being said, the lower time frames will reveal opportunities for the meanwhile which could be either bullish or bearish. 

Weekly chart

The weekly chart is actually offering the most compelling story – bearish. 

The overextended W-formation needs a correction and the 38.2% and 50% Fibos align with prior structure. 

This sets the basis for a downside bias and target.

Let’s see how the daily chart aligns with the outlook on the weekly chart, and if there is synergy, then that would add an additional layer of conviction. 

Daily chart

The wick is expected to be filled in on the 4-hour time frame which should provide further bearish structure to reinforce the prospects of a lower low. 

4-hour chart

As illustrated, the price is testing old support now expected to be resistance.

A high probability trade set up can be established ‘at market’ for a 1:3 risk to reward opportunity, targeting the weekly 38.2% Fibonacci retracement level in 72.10. The stop-loss can be placed above structure.