The yen pairs appear to be moving higher despite an increase in risk to trade in the global markets. Sentiment appears to be holding up, perhaps to do with the good economic data we are receiving at the moment, however, in recent trading days we have had a lot of trade war noise. The US seems to be serious about the next $200bn of tariffs against China and that must have a negative effect. The indices look like they might be turning lower which would normally drag the yen pairs down but that dynamic is not playing out. Should the trade war noise start to turn into some hard facts and data about reduced trade then we can expect to see a more significant fall in the indices and a possible flight to safety that will drag the yen pairs lower and boost assets like Gold
. Of all the currencies NZD appears to have the weakest fundamental backing with a dovish central bank
, falling export prices (especially dairy) and an export-driven economy that needs good global trade to survive.
My preferred option in a risk-off scenario is to sell NZDJPY
, the technical situation looks quite strong, we have a clear downward trend with a series of lower lows and lower highs marked by the orange trendline and no real resistance for some time marked by the red line. At the moment NZDJPY
is bouncing from a recent low and it appears to be trading out a three wave bounce, the prefered scenario for wave traders as it gives a target for the end of the bounce. In this case, the target is right at the trendline where a turn lower might be expected.
The plan is as follows:- If risk sentiment starts to fall away (more trade war talk, indices moving lower, gold
moving higher) and the current NZDJPY
bounce continues in three waves I will sell it somewhere near the trendline risking 2% of equity hoping for a risk reward of 3:1