Although NZDJPY shows interim rallies upon hammer and dragonfly doji patterns 70.229 and 70.157 levels respectively, these upswings seem momentary as the overbought pressures form hanging man at 71.211 and back-to-back shooting star patterns at 71.104 and 71.132 levels. These bearish patterns coupled with overbought pressures signal weakness at this juncture.
The decline in January could extend below 70.00 if the coronavirus epidemic persists. Event risk during the next week comes from wage data and a leading index.
The shooting star, hanging man and bearish engulfing patterns pop-up quite often on both intraday as well as long-term charts to remind us the major downtrend. While MACD & DMAs are indecisive but bearish bias.
On a broader perspective, to substantiate the above standpoint, the major downtrend was sliding through the falling wedge (refer monthly chart) although it took support at wedge baseline, the interim rallies were capped at 21EMAs.
The bearish engulfing pattern has occurred at 70.015 levels that intensifies the major downtrend below EMAs, this bearish pattern nudges price below EMAs. Overall, both minor and major trends seem to show renewed weakness.
Hence, shorts in the mid-month futures have been advocated with a view of arresting further downside risks.
Alternatively, one can also buy tunnel options spreads with upper strikes at 71.271 and lower strikes at 70.815 levels on the trading grounds (spot reference: 71.104 levels).
