NZDJPY has been trending lower on its short-term time frames after recently bouncing off a long-term ceiling.

Price is forming a descending trend line and a correction is underway. 

Applying the Fib retracement tool on the latest swing low and high shows that the 50% level lines up with the falling resistance around 81.30. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In other words, the selloff is more likely to resume than the reverse. 

Stochastic seems to be turning down from the overbought area, though, which suggests that sellers are eager to push price back down to the swing low near 80.15 or lower. 

The RBNZ decided to keep interest rates unchanged at 1.75% as expected, adding that accommodative monetary policy remains appropriate for now. They did express concern about weak price pressures and reiterated that a lower NZD is needed. 

Meanwhile, the Japanese yen has gained support on risk-off flows coming from the tensions with North Korea. The latest headlines are suggesting that Pyongyang is looking into a simultaneous firing of missiles on Guam, the nearest U.S. territory in the Pacific, and calling Trump’s “fire and fury” remark as “nonsense.”

Any indication that the situation is getting worse could mean more downside for higher-yielding currencies like the Kiwi and a likely rally in the safe-haven yen. On the other hand, easing tensions could bring risk-taking back to the table and keep the pair supported. 

By Kate Curtis from Trader’s Way