NZD/JPY pares Monday’s losses, reclaims the 77.00 thresold as market sentiment improves

• The NZD/JPY edges up some 1.18% during the day.
• Market sentiment dynamics and commodity prices linked to the kiwi would be the drivers for the pair.
• NZD/JPY Technical Outlook: Upwards in the near-term after piercing the 77.00 figure.

The NZD/JPY recovers from its free-fall as the year’s end looms, trading at 77.22 as the Wall Street session ends at the time of writing. Wall Street closed in the green, with US stock indices recording gains between 1.60% and 2.76%. Asian equity futures point to a higher open, thus weighing on the safe-haven status of the Japanese yen.

That said, the session’s gainers were the risk-sensitive currencies, like the NZD, the AUD, and the CAD, whereas the low yielders EUR, CHF, and the JPY dropped on Tuesday.

The NZD/JPY pair benefitted from the market mood improvement spurred by Covid-19 vaccines helping to tame the Omicron variant. Further, in the middle of Wall Street’s session, the US Food and Drug Administration (FDA) is set to approve Covid-19 treatment pills, developed by Pfizer and Merck. 

Apart from this, any risk-aversion in the financial markets would witness Japanese yen strength, in turn, drops in the NZD/JPY pair. On the other hand, any rallies in stocks would favor risk-sensitive currencies like the NZD, the GBP, and the AUD.

NZD/JPY Price Forecast: Technical outlook

The NZD/JPY daily chart depicts the pair still in a downward bias, as the daily moving averages (DMAs) reside well above the spot price, slightly horizontal, and would be strong resistance to overcome for NZD bulls. Tuesday’s price broke aggressively after piercing the 76.00 figure, jumping some 120-pips upwards where it currently trades.

To the upside, the first resistance would be the December 8 high at 77.55. The breach of the latter would expose December’s 16 cycle high at 77.96, followed by the 200-DMA at 78.01.

On the flip side, the first support would be the December 3 swing low at 75.95. A decisive breach of the latter would open the door for further losses. The next line of defense downwards would be the July 20 swing low at 75.25, followed by the August 19 low at 74.55