So you wanna SHORT NZD/JPY? Here is why it could get tricky!Hey tradomaniacs,
since Jerome Powell stated that "there is no inflation" the market keeps betting against the FED and tries to poke Jeromes nerves with rising YIELDs.
This is obviously bad for equities, because higher returns provides a great alternative to Stocks, which is causing a strenght for the US-Dollar.
So why could a short NZD/JPY be choppy?
NZD/USD currently reacts so sensitive because stocks are falling. NZD/USD is a risk-on-currency and since correlations have changed in the market almost all majors against USD having very huge standard deviations.
This is basically because the economy improves when US-DOLLAR falls, due to the fact that the provided liquidity, or inflation, boost consume and investments -> Higher grow expectations -> Good for stocks.
Now we got these correlations in the market:
YIELDS and US-DOLLAR rise -> Equities fall
Equities fall -> NZD falls
YIELDS rise -> JPY falls
When NZD and JPY both tend to fall due to the current correlations, NZD/JPY could be the worst NZD-pair to short, or generally to trade.
The best JPY-Pair to trade is currently USD/JPY, as DXY moves up while JPY falls as long as the inflation-worries continues.
Non the less, we could see stop-losses getting triggered and so a fall of NZD/JPY.
Compare NZD/USD to NZD/JPY, and you will se what I mean. :-)
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Peace and good trades
Irasor
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