NZD/JPY Price Prediction: Seems vulnerable below 38.2% Fibo. amid RBNZ’s dovish tilt

• NZD/JPY witnessed a dramatic turnaround from a nearly two-week high touched this Wednesday.
• The RBNZ’s surprise rate cut prompts aggressive selling, though a positive risk tone helps limit losses.
• The technical setup favors bearish traders and supports prospects for a further near-term downfall.

The NZD/JPY cross retreated around 150 pips from the 89.50 area, or a nearly two-week high touched earlier this Wednesday in reaction to the Reserve Bank of New Zealand's (RBNZ) surprise 25 basis points (bps) rate cut. Spot prices, however, manage to rebound a few pips from the daily low and trade around mid-0.8800s during the first half of the European session, still down 0.80% for the day. 

A generally positive tone around the equity markets, along with diminishing odds of the Bank of Japan (BoJ) hiking interest rates again this year, undermines the safe-haven Japanese Yen (JPY) and offers some support to the NZD/JPY cross. That said, any meaningful recovery still seems elusive in the wake of the RBNZ's dovish tilt, indicating more cuts over the coming months in the wake of the recent progress towards meeting the annual inflation target and weaker domestic economic growth.

From a technical perspective, the NZD/JPY cross once again failed to make it through the 38.2% Fibonacci retracement level of the July-August fall. The said barrier is pegged around the 89.10-89.15 region and is followed by the daily high, around the 89.50 area. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and set the stage for the resumption of the recent strong recovery from the vicinity of the 83.00 mark, or the lowest level since May 2023 touched last week. 

The NZD/JPY cross might then aim to surpass the 90.00 psychological mark and climb further towards the next relevant hurdle near the 90.50-90.55 region. The momentum could extend further towards the 50% Fibo. level, around the 91.00 mark, which could act as a strong barrier and cap the upside for spot prices.

Meanwhile, oscillators on the daily chart are holding deep in negative territory and have also recovered from the oversold zone. This, in turn, suggests that any meaningful positive move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. That said, bearish traders are likely to wait for a convincing break below the 88.00 mark before placing fresh bets. The NZD/JPY cross might then turn vulnerable to test sub-87.00 levels, or the 23.6% Fibo. level support.

NZD/JPY daily chart