NZDJPY has been moving in a steady uptrend inside a tight ascending channel on its 4-hour chart. 

Price is currently testing the channel support near the 87.50 minor psychological level while stochastic is almost in the oversold area.

Buyers could return once stochastic climbs out of the oversold zone but for now, it looks like sellers could stay in control. If selling pressure remains strong, price could break below channel support and start a reversal. This downtrend could carry on until the next support zone near the 86.50 to 87.00 psychological levels.

On the other hand, a bounce could take the pair up to the channel resistance near the 88.00 major psychological level. Going long at market with a tight stop and a target of 88.00 could yield a high return on risk for a day trade. If you’re bearish on this pair, you could wait for an actual test of 88.00 or a break below the channel support and a longer-term profit target.

Earlier today, the RBNZ announced its decision to keep interest rates unchanged at 3.50% for the time being while calling attention to the overvalued Kiwi. However, weak fundamentals from Japan might also be enough to keep this pair afloat.

By Kate Curtis from Trader’s Way