False Breakout on NZD/JPY Signals Bearish Reversal

In today’s technical analysis, let’s take a closer look at New Zealand Dollar to Japanese Yen (NZD/JPY), where a significant shift in sentiment has emerged following a false bullish breakout. Yesterday’s session began on a positive note, as the price managed to climb above the key horizontal resistance at 88.9, marked with the orange line. This level had acted as a strong resistance since late November and was tested multiple times in December, signaling its importance as a critical threshold for the market.

The breakout above 88.9 initially appeared convincing, suggesting that buyers had taken control and were aiming for higher levels. However, the rally was short-lived. The price failed to sustain the upward momentum and quickly reversed, forming a double top pattern. This bearish reversal structure is highlighted with a yellow rectangle and indicates that buyers were unable to push the price higher, giving sellers an opportunity to re-enter the market.

Now, the price has moved decisively back below the orange resistance at 88.9, invalidating the earlier breakout. Such false breakouts are powerful signals in technical analysis because they often lead to sharp moves in the opposite direction. In this case, the rejection of higher levels creates a clear signal to sell, as it suggests a lack of demand above the resistance and growing bearish pressure.

From this perspective, the sentiment on NZD/JPY has turned negative. The next target for sellers would be around the nearest support level, which could be the midterm upward trendline or another key horizontal support below. However, traders should monitor the price action closely, particularly for any bullish reversal signals around these potential support areas.

Source: https://www.axiory.com/analytics/technical-analysis/false-breakout-on-nzd-jpy-signals-bearish-reversal