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NZDJPY: Improved risk outlook puts bulls in chargeNZD has gained in recent months from the market's improved risk outlook on global vaccine confidence. The NZD's recovery is being aided by China's stronger-than-expected trade figures. According to recent figures, May's imports and exports were likely positive. A rise in commodity prices benefits the currencies of commodity-producing countries. According to Bloomberg, the Reserve Bank of New Zealand (RBNZ) stated on Thursday that it will progressively sell off the government bonds bought during its quantitative easing (QE) program over the next five years. When the (RBNZ) sells bonds, the money supply is reduced because cash is removed from the economy in return for bonds. In the long run, decreasing a country's money supply leads its currency to appreciate.
Long
by TradeyMarkets
1
Today’s Notable Sentiment ShiftsUSD – The dollar rose on Wednesday, holding most of its earlier gains after minutes from the FOMC’s May meeting showed that most participants believed half-percentage-point rate increases would likely be appropriate in June and July. Commenting after the minutes’ release, BMO Capital Markets noted that “as it conducts a pair of 50 bps rate hikes during the next two months, the Fed will likely keep its cards closer to its chest, waiting to see how the outlook and risks unfold before proffering what we expect will be another strong policy signal. That is, unless further worrisome inflation developments force the Fed to lay it cards on the table.” RBNZ – New Zealand’s central bank delivered its fifth straight interest rate hike on Wednesday and signalled a much more aggressive tightening path as authorities seek to reduce the second-round effects of runaway inflation. The RBNZ raised the OCR by 50 basis points to 2.0%, a level not seen since November 2016, while also revising its projections, expecting the cash rate to double to 4.0% over the next year and remain there into 2024. Justifying its more aggressive stance, the RBNZ noted that “a larger and earlier increase in the OCR reduces the risk of inflation becoming persistent, while also providing more policy flexibility ahead in light of the highly uncertain global economic environment.”
TVC:DXY
by thunderpips
1
New Zealand dollar sinks after US CPIThis week has gone from bad to worse for the New Zealand dollar, as NZD/USD has taken a tumble on Thursday. In the North American session, NZD/USD is trading at 0.6248, down 0.74% on the day. The currency has dropped 2.66% this week and is trading at lows not seen since June 2020. The US inflation report for April showed that CPI eased, but the decline was much smaller than expected. US CPI dropped from 8.5% to 8.3%, above the estimate of 8.1%. This chilled any speculation of an '"inflation peak", as the markets digested the fact that even if inflation is moving lower, it could do so at a very slow pace. For the Fed, the high inflation reading confirms that its hawkish stance is justified, but now there are calls for policy makers to be even more aggressive in tightening the monetary screws. The Fed has signalled that it plans to deliver 50-bps increases in June and July, but the markets aren't dismissing the possibility of a massive 75-bps hike. Fed member James Bullard said on Wednesday that 50-bps moves were his base case and this appears to be the majority view. Still, inflation was higher than investors or the Fed had expected, and the May inflation report, which will be released just a few days prior to the Fed's next meeting on June 14-15th, will be critical in determining the size of the next rate hike. The Fed has embarked on a rate-hike cycle primarily because of soaring inflation, so it stands to reason that inflation will be a key factor in rate policy. Fed member Mester said on Tuesday that she supports raising rates by 50-bps at the next two meetings and then speeding up or slowing down the pace of increases based on inflation levels. The RBNZ is also under pressure to tighten more aggressively after Inflation Expectations for Q2 crept upwards to 3.29% (3.27% prior). Inflation Expectations have now risen for an eighth successive month, and the RBNZ is looking to reverse this trend. At the April meeting, the RBNZ said it would act to ensure that "current high consumer price inflation does not become embedded into longer-term inflation expectations.”  With Inflation Expectations not showing any signs of easing, the RBNZ is widely expected to raise rates by 50-bps at the May 25th meeting. NZD/USD is down sharply and has broken below support at 0.6281. Below, there is support at 0.6169 There is resistance at 0.6344 and 0.6456
by OANDA
NZ dollar steady after solid jobs reportThe New Zealand dollar is in positive territory on Wednesday, as the currency looks for its first winning session since April 20th. The New Zealand labour market remains robust, as confirmed by the Q1 employment report. The unemployment rate remained at a record low of 3.2%, matching expectations. Employment growth fell to 2.9%, (3.1% exp.), which was down from the 3.5% gain in Q1. What was perhaps more significant was wage growth, which climbed to 3.1% YoY, its highest level since 2008. The RBNZ places great weight on wage growth and this upswing will raise pressure on the central bank to deliver another 0.50% rate hike at the May 25th meeting, which would bring the Official Cash Rate to 2.0%. Inflation hit 6.9% in the first quarter and the RBNZ is determined to curb inflation expectations, which like CPI, continues to accelerate. The RBNZ delivered a 0.50% in April and has telegraphed the markets that more tightening is needed. Despite the RBNZ's hawkish stance, the New Zealand dollar has been steamrolled by its US cousin. NZD/USD plunged 6.88% in the month of April, even with the 0.50% rate hike in April. The Fed holds its policy meeting later today, with a 0.50% rate increase a virtual certainty. Such a move will be highly significant, as it would mark the Fed's largest rate increase in 20 years and demonstrates that the Fed is committed to reducing inflation, which has hit 40-year highs. The half-point increase has been priced in, but what remains uncertain is the tone of the rate statement and how aggressively will the Fed scale back its balance sheet (quantitative tightening). If the Fed delivers a hawkish message to the markets in addition to the rate hike, the US dollar will likely respond with gains. There is support at 0.6391 and 0.6325 We find resistance at 0.6519 and 0.6585
by OANDA
NZ dollar drops to 22 month-lowThe misery continues for the New Zealand dollar, which is down almost 1% on Thursday. NZD/USD has fallen below the 0.65 level and has plunged 6.54% in the month of April. ANZ Business Confidence was unchanged in April, with a reading of -42.0. That means close to half of New Zealand businesses are pessimistic about the economic outlook over the next 12 months. The problems identified by businesses are nothing new, with shortages in materials and workers and inflation driving up costs. New Zealand inflation hit 6.9% in Q1, a 30-year high. In addition to the surge in inflation, businesses expect inflation to continue to rise - in April, inflation expectations rose to 5.9%, up from 5.5% in March. The upside risk in inflation expectations is a paramount concern for the RBNZ, which faces a massive battle in wrestling inflation to lower levels. Today's weak Business Confidence report will exacerbate those worries and will support aggressive rate tightening from the RBNZ in order to get a handle on spiralling inflation. A back-to-back hike of 0.50% at the May meeting is a strong possibility. Even with the RBNZ in aggressive mode, the US dollar continues to pummel its New Zealand counterpart. The Federal Reserve is poised to deliver another half-point hike at next week's meeting and has hinted at more oversize rate hikes in order to curb high inflation. US Treasury yields are moving higher, which is supporting the US dollar rally. Yields rose on Thursday, even though US GDP surprised with a contraction in Q1, the first negative growth recorded since the pandemic recession in 2020. NZD/USD has broken below the 0.6504 line. Next, there is support at 0.6381 There is resistance at 0.6569 and 0.6692
by OANDA
RBNZ super-hikes but NZD slidesThe RBNZ came out swinging on Wednesday, as it hiked the Cash Rate to 1.50%, with an oversized hike of 50-basis points. Ordinarily, a sharp rate hike by a central bank would prop up the local currency, but that was not the case today. The central bank seemed to hit the right buttons to show its hawkish stance, with its largest rate hike since April 2000. However, instead of rising, the New Zealand dollar took a tumble, falling more than 1 percent. What happened to the New Zealand dollar, which now finds itself at 4-week lows? The RBNZ seemed to hit the right hawkish buttons, which should have boosted the kiwi. The super-size rate hike was not priced in by the markets, which had expected a modest 0.25% increase. In its rate statement, the RBNZ noted that it planned to bring forward monetary normalisation in order to lower inflation. What sent the New Zealand dollar spinning on its backside was the fact that the central bank did not change its terminal policy forecasts for 2022 and 2023. The markets chose to focus on the lack of new forecasts rather than the hike and the rate statement, sending the New Zealand dollar sharply lower. The RBNZ is hoping that today's hike will curb not just inflationary pressures but also inflation expectations. Business confidence is in deep-freeze, with spiralling inflation one of the key concerns facing businesses. The RBNZ has no plan to let up on its rate-hike cycle, which raises concerns as to whether the central bank can shepherd the economy to a 'soft landing' once inflation is brought down to lower levels. If the RBNZ is over-aggressive in its tightening, that could result in the dampening of economic growth and even a recession.  As for today's performance from the RBNZ, it's clear that it will take more than 0.50% rate hikes to boost the New Zealand dollar. There is resistance at 0.6902, followed by 0.6980 NZD/USD has support at 0.6769 and 0.6691
by OANDA
NZDJPY - Will BE MARKET RISK ON ? ⛔️ None of the important data for the NZD will be released this week. The most important INDICATOR DATA for JPY is not yet released. But the New Zealand Central Bank meeting, one of the most important EVENTs for the New Zealand dollar, is set to take place next week. ⛔️ NZD FEATURE is currently down a bit. The main reason for that is because MARKET RISK OFF. Today there is a slight market risk on the situation. The NZD FEATURE stands at 0.6875 LEVEL. The JPY FEATURE has been heavily DOWN before. Stay tuned for the VIX INDEX. Currently VIX is getting somewhat DOWN. NZDJPY Price is based on DYNAMIC LEVELS. ⛔️ Currently the SENTIMENT of the OVERALL MARKET is being POSITIVE. Also, even though the EQUITIES are turning a bit red, we are not affected by the VOLATILITY DOWN. Also COMMODITIES still shows a UP SIDE BIAS. There is a NEUTRAL BIAS currently on the market. We can not say for sure whether the MARKET SENTIMENT is UP or DOWN. But according to the data available so far we can say that MARKETS RISK is turning ON. ⛔️ NZDJPY Price may be slightly higher at 88.77 LEVEL according to MARKET STRUCTURE. Then the NZDJPY price can be DROP. This is because they have already decided that the Central Bank of New Zealand will inevitably raise their statutory reserve ratio next week.
by benny_marshall
NZ dollar falls as FOMC talks toughThe New Zealand dollar has extended its losses on Thursday and dropped below the 69 line. In the North American session, NZD/USD is trading at 0.6887, down 0.42% on the day. The hawkishness of the FOMC minutes was not a surprise, given that the markets had heard this from Fed members George and Brainard a day earlier. Still, a hawkish Fed that is accelerating its tightening is good news for the US dollar. The minutes signalled that the Fed plans to scale back the balance sheet (quantitative tightening) at a faster pace than previously expected, cutting up to USD 95 billion/month starting in September. The minutes hinted that the Fed could implement super-size 1/2 point hikes in the coming months, in order to curb red-hot inflation. Brainard said the same thing on Tuesday, but this was noteworthy because she has been of the most dovish members of the FOMC. Clearly, the Fed is concerned that the traditional 0.25% rate moves may not suffice to wrestle down high inflation. The Fed has been behind the ball in tackling inflation, and firing 0.50% salvos is one way to demonstrate to critics that it is taking strong action. The Fed has been telegraphing the markets that 1/2 point increases are on the table, in order to minimize market volatility. Still, the sheer size of such hikes would likely provide a boost to the US dollar, even if they have been priced in. The RBNZ is well into its rate-hike cycle and has raised the cash rate from a record-low 0.25% to 1.00%. The central bank holds a policy meeting next week and there is a strong likelihood of a rate increase. RBNZ forecasts show rates rising to 2.5% over the next 12 months and peaking at about 3.25% at the end of 2023.
by OANDA
NZDUSD: 70 Cents A Likely Target For The KIWI After Breakout!Price is at a critical resistance level! The 0.68600 level needs to be cleared for the price to target the next high which happens to be the psychological resistance of 70 Cents. Looking at the main daily chart, the descending channel although violated, has not really been broken. The resistance at 0.68600 is preventing this from being a reality. Once the daily candle closes above this level, we can likely assume that the resistance has been broken and the price is ready to climb further supported by the ascending trendline. An ideal 1:1 risk to reward ratio needs to be balanced for the trade to be executed. With both take profit and stop loss visible on the main chart, the entry point needs to be adjusted ideally to match 1:1 RR. Cheers, I hope you find this insight helpful. Please LIKE & FOLLOW for more regular insights into other major currency pairs.
Long
by FX618Analysis
EUR/NZD Sell Opportunity: Breaks Below Trendline Support This week on Tuesday, EUR/NZD dropped below the long-term trendline support ahead of RBNZ rate decision and monetary policy. RBNZ expects a rise official cash rate from 0.75% to 1.00%. Despite a sharp downside in the global equity space on further escalating military tensions between Ukrainian and pro-Russia separatist/Russia forces and continued Russia/NATO tensions in the background, EUR/NZD has dropped below the critical trendline resistance level and creates a selling opportunity. From the current zone, 1.6950 was the trendline support zone. Now it has become a trendline resistance. So, as long as EUR/NZD is below the trendline support, it still has chances to drop further. The market expects RBNZ to rise 50BPS though RBNZ forecasted only 25 BP. Any surprise rate hike like 50BP or more will Send EUR/NZD 1.6500 price zone or more. From the present rate, immediate support is identified is at the 1.6840 price zone. Breaking below 1.6840, our final target to the downside is 1.6500.
Short
by Gold_Trading_Expert
GBP/NZD Double Top in Play as RBNZ Hikes RatesThe New Zealand Dollar gained after the RBNZ raised interest rates to 1% form 0.75% in February. On the 4-hour chart, GBP/NZD confirmed a close under a bearish Double Top I have been closely following since last week: www.dailyfx.com This may hint at reversing the uptrend from November, with immediate support as the 38.2% Fibonacci retracement at 1.9890. Other levels below include 50%, 61.8% and 78.6% at 1.9691, 1.9492 and 1.9208 respectively. Overturning the bearish projection entails a confirmatory close above the 2.0487 - 2.0535 resistance zone. FX_IDC:GBPNZD
by QM_Dubrovsky
NZD/USD Squeezing HigherThe Reserve Bank of New Zealand helped the NZD/USD to fresh month highs back above 0.6750 as they raise interest rates to 1.0% from 0.75%. Importantly they also had a hawkish statement which has helped underpin the squeeze and with Covid and Ukraine War fears subsiding an improving risk appetite will also help push the NZD back to 0.6890 and potentially 0.7000 in extention. easyMarkets Account on TradingView allows you to combine easyMarkets industry leading conditions, regulated trading and tight fixed spreads with TradingView's powerful social network for traders, advanced charting and analytics. Access no slippage on limit orders, tight fixed spreads, negative balance protection, no hidden fees or commission, and seamless integration. “Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, are intended only to be informative, is not an advice nor a recommendation, nor research, or a record of our trading prices, or an offer of, or solicitation for a transaction in any financial instrument and thus should not be treated as such. The information provided does not involve any specific investment objectives, financial situation and needs of any specific person who may receive it. Please be aware, that past performance is not a reliable indicator of future performance and/or results. Past Performance or Forward-looking scenarios based upon the reasonable beliefs of the third-party provider are not a guarantee of future performance. Actual results may differ materially from those anticipated in forward-looking or past performance statements. easyMarkets makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or any information supplied by any third-party."
Long
by easyMarkets
1
New Zealand dollar slide continuesThe New Zealand dollar has extended its losses on Friday, after five straight losing sessions. NZD/USD is currently trading at 0.6823, down 0.45% on the day. Risk apprehension is sharply lower in the markets today, as a Covid variant which has spread in South Africa is causing concern around the world. Two cases of the variant were detected in Hong Kong today and it's a safe bet that it has spread to other regions as well. Investors have responded by dumping risky assets and snapping up safe-havens like the US dollar. This has weighed on the slumping New Zealand dollar, which is down 2.36% this week. The New Zealand dollar didn't get any help from the RBNZ, which raised rates by 0.25%, to 0.75%. The central bank has now raised rates for two consecutive months and has signalled that it will continue to raise rates. Nevertheless, there was some disappointment that the bank didn't show a more aggressive hand and hike rates by 0.50%. The New Zealand dollar tumbled after the decision and lost 1.0% on Wednesday. The Federal Reserve is expected to accelerate the tapering of its pandemic bond purchase programme. The FOMC minutes showed that policy makers are concerned about inflation and stated that if inflation continues to rise, they are willing to consider adjusting bond purchases and raising interest rates. Goldman Sachs said in a note on Thursday that it expects to Fed to double its taper trim from USD 15 billion to USD 30 billion each month, starting in January. This means that the programme will be wound up by March instead of June. An earlier end to the bond purchase scheme means that the Fed can look at raising rates sooner, which is bullish for the US dollar. NZD/USD continues to break below support levels. The pair is testing support at 0.6857. Below, 0.6747 is a monthly support level There is resistance at 0.7059 and 0.7120
by OANDA
The Cautious Kiwi (25 November 2021)As widely expected, we see a further tightening of monetary policy from the Reserve Bank of New Zealand (RBNZ) during the meeting on Wednesday. But the decision did not gain any positive market reaction for the New Zealand dollar as the 0.25% hike in interest rate had already been priced in. It was a 0.50% hike that the market was yearning for. Once the market did not receive the 0.50% hike, a strong sell-off in the New Zealand dollar followed across the board. Catalysts for more rate hikes: maximum employment, high inflation and rising home prices The RBNZ highlighted that employment in New Zealand is now above its maximum sustainable level while unemployment rate has declined to the lowest level in over a decade. At the same time, annual inflation in the country has risen to 4.9%, way above the central bank’s 1-3% target amid the ongoing supply chain bottlenecks and the rising global oil prices. Furthermore, the RBNZ is expecting prices to remain high in the near term before declining back down to within their targeted range. On the matter of home prices, the central bank’s officials concluded that the current level of home prices are unsustainable but noted that continued hikes in interest rate will likely lead to more sustainable home prices. Bond holdings under LSAP no longer significant With the functioning of the bond market improving, the RBNZ has stopped purchasing bonds under the Large Scale Asset Purchase (LSAP) programme in July. Furthermore, the current holdings of the bonds purchased by the central bank are only providing meagre stimulus. Thus, the RBNZ will be providing more details on winding down its bond holdings early next year. All is not lost! Although the modest rate hike was kind of a disappointment, causing the New Zealand dollar to take a hit, it is likely that the impact will be temporary. The RBNZ’s interest rate projection for 2022 indicates that rate hikes are expected in every quarter of the year, with interest rate rising to 2.1% by year-end. This interest rate level has surpassed the pre-pandemic level, thus indicating the central bank’s forecast that the New Zealand economy in 2022 is likely going to outperform the year just before the pandemic struck. The projection material also showed that the RBNZ is expecting annual inflation to peak at 5.7% during the first quarter of 2022 before declining steadily to 3.3% by year-end. However, the expected decline throughout the year is insufficient for inflation to fall within the central bank’s 1-3% target. And so, the officials may still consider a more aggressive rate hike as an option in the future in order to add more downward pressure on prices.
by GH_Lee
NZDJPY Swing trade + Fundamental DriversHello Traders! A high conviction trade is in the table, anything around 80.200 region is very good. Place stops below the supply zone. Take profit at the highs. Fundamental Drivers New Zealand Dollar (NZD) Fundamental Bias: Bullish 1. The Monetary Policy outlook for the RBNZ At their Oct meeting, the RBNZ delivered on expectations to raise the OCR to 0.50%. As the hike was already fully priced, the lack of new hawkish tones we saw a textbook buy-the-rumour-sell-the-fact reaction in the NZD pushing lower. There was additional focus on the RBNZ expecting headline CPI to climb above 4 percent in the near term, but the most important part of the statement was the subsequent comment that the bank still sees CPI returning towards the 2 percent midpoint over the medium term and that ‘the current COVID-19-related restrictions have not materially changed the medium-term outlook for inflation and employment since the August Statement’. Thus, despite recent covid concerns, inflation concerns and energy concerns, that part of the statement acknowledged that nothing has changed in terms of the bank’s OCR projections released at the August meeting. Unsurprisingly, the bank also stated that their future rate path is contingent on the medium-term outlook for inflation and employment, which means keeping close tabs on incoming data and the virus situation will remain a key focus for us in the weeks and months ahead. With the bank now being the first to hike rates among the major central banks and sitting on the highest cash rate among the majors, and with an OCR projection that is still head and shoulders above the rest, the bias for the NZD remains firmly titled to the upside, and as rates keeps rising, the currency’s carry attractiveness will be a key focus point for the NZD in the months ahead. 2. Developments surrounding the global risk outlook. As a high-beta currency, the NZD benefited from the market's improving risk outlook coming out of the pandemic as participants moved out of safe-havens. As a pro-cyclical currency, the NZD enjoyed upside alongside other cyclical assets supported by reflation and post-recession recovery best. If expectations for the global economy remains positive the overall positive outlook for risk sentiment should be supportive for the NZD in the med-term, but recent short-term jitters are a timely reminder that risk sentiment is also a very important short-term driver. 3. Economic and health developments Virus cases can still have an impact on NZD sentiment, which means the fact that NZ virus cases is at record high levels is something to pay attention to. For now, it’s had very limited impact on the NZD due to the NZ government abandoning their covid-zero strategy and since virus risks have been downplayed by the RBNZ, but further escalation leading to more lockdowns will be important to keep on the radar. Japanese Yen (JPY) Fundamental Bias: Bearish 1. Safe-haven status and overall risk outlook As a safe-haven currency, the market's risk outlook is the primary driver of JPY. Economic data rarely proves market moving; and although monetary policy expectations can prove highly market-moving in the short-term, safe-haven flows are typically the more dominant factor. The market's overall risk tone has improved considerably following the pandemic with good news about successful vaccinations, and ongoing monetary and fiscal policy support paved the way for markets to expect a robust global economic recovery. Of course, there remains many uncertainties and many countries are continuing to fight virus waves, but as a whole the outlook has kept on improving over the past couple of months, which would expect safe-haven demand to diminish and result in a bearish outlook for the JPY. 2. Low-yielding currency with inverse correlation to US10Y As a low yielding currency, the JPY usually shares an inverse correlation to strong moves in yield differentials, more specifically in strong moves in US10Y . However, like most correlations, the strength of the inverse correlation between the JPY and US10Y is not perfect and will ebb and flow depending on the type of market environment from a risk and cycle point of view. With bond yields looking a bit stretched at the current levels any decent mean reversion is expected to be supportive for the JPY, so it remains a key asset class to keep track. Have a great week! Regards Vitez
Long
by Vitezabraham
NZDJPY Swing trade that you can take now + Fundamental Drivers Hello Traders! We approached a significant support area and having a strong fundamental and seasonal upside bias for the New Zealand Dollar against the Japanese Yen. Enter at market is possible manage risk below the support area. Fundamental Drivers: New Zealand Dollar (NZD) Fundamental Bias: Bullish 1. The Monetary Policy outlook for the RBNZ: At their Oct meeting, the RBNZ delivered on expectations to raise the OCR to 0.50%. As the hike was already fully priced, the lack of new hawkish tones we saw a textbook buy-the-rumour-sell-the-fact reaction in the NZD pushing lower. There was additional focus on the RBNZ expecting headline CPI to climb above 4 percent in the near term, but the most important part of the statement was the subsequent comment that the bank still sees CPI returning towards the 2 percent midpoint over the medium term and that ‘the current COVID-19-related restrictions have not materially changed the medium-term outlook for inflation and employment since the August Statement’. Thus, despite recent covid concerns, inflation concerns and energy concerns, that part of the statement acknowledged that nothing has changed in terms of the bank’s OCR projections released at the August meeting. Unsurprisingly, the bank also stated that their future rate path is contingent on the medium-term outlook for inflation and employment, which means keeping close tabs on incoming data and the virus situation will remain a key focus for us in the weeks and months ahead. With the bank now being the first to hike rates among the major central banks and sitting on the highest cash rate among the majors, and with an OCR projection that is still head and shoulders above the rest, the bias for the NZD remains firmly titled to the upside, and as rates keeps rising, the currency’s carry attractiveness will be a key focus point for the NZD in the months ahead. 2. Developments surrounding the global risk outlook: As a high-beta currency, the NZD benefited from the market's improving risk outlook coming out of the pandemic as participants moved out of safe-havens. As a pro-cyclical currency, the NZD enjoyed upside alongside other cyclical assets supported by reflation and post-recession recovery best. If expectations for the global economy remains positive the overall positive outlook for risk sentiment should be supportive for the NZD in the med-term, but recent short-term jitters are a timely reminder that risk sentiment is also a very important short-term driver 3. Economic and health developments: Virus cases can still have an impact on NZD sentiment, which means the fact that NZ virus cases is at record high levels is something to pay attention to. For now, it’s had very limited impact on the NZD due to the NZ government abandoning their covid-zero strategy and since virus risks have been downplayed by the RBNZ, but further escalation leading to more lockdowns will be important to keep on the radar. 4. CFTC analysis Latest CFTC data showed a positioning change of +4955 with a net non-commercial position of +13861. The NZD reflects net-long positioning for both large speculators as well as leveraged funds but are nowhere near stress levels right now. With the NZD now sitting on the highest cash rate among the major economies and with expectations of that to continue to rise we think carry attractiveness will become a key focus point for the NZD in the months ahead and should mean a favourable upside bias for the NZD against the low yielders like JPY and CHF. In the short- term though, as we mentioned above, the virus situation could see some of the recent upside given back, and also keep overall risk sentiment in mind which saw the NZD failing to benefit from the stellar quarterly jobs data released last week. Japanese Yen (JPY) Fundamental Bias: Bearish 1. Safe-haven status and overall risk outlook As a safe-haven currency, the market's risk outlook is the primary driver of JPY. Economic data rarely proves market moving; and although monetary policy expectations can prove highly market-moving in the short-term, safe-haven flows are typically the more dominant factor. The market's overall risk tone has improved considerably following the pandemic with good news about successful vaccinations, and ongoing monetary and fiscal policy support paved the way for markets to expect a robust global economic recovery. Of course, there remains many uncertainties and many countries are continuing to fight virus waves, but as a whole the outlook has kept on improving over the past couple of months, which would expect safe-haven demand to diminish and result in a bearish outlook for the JPY. 2. Low-yielding currency with inverse correlation to US10Y As a low yielding currency, the JPY usually shares an inverse correlation to strong moves in yield differentials, more specifically in strong moves in US10Y. However, like most correlations, the strength of the inverse correlation between the JPY and US10Y is not perfect and will ebb and flow depending on the type of market environment from a risk and cycle point of view. With bond yields looking a bit stretched at the current levels any decent mean reversion is expected to be supportive for the JPY, so it remains a key asset class to keep track. 3. CFTC Analysis Latest CFTC data showed a positioning change of -588 with a net non-commercial position of -107624. The past few weeks of price action in the JPY was mostly driven by the excessive moves we saw in yields on the US side but was also exacerbated by risk on flows and rising oil prices which is a negative driver for Japan for its terms of trade. Even though the bias for the JPY remains firmly tilted to the downside, the moves across JPY pairs is arguably still looking stretched, and with both large speculators and leveraged funds firmly in net-short territory the odds of some mean reversion has increased. We would prefer waiting for some of the froth to mean revert before looking for new JPY shorts. As always, any major risk off flows can still support the JPY, especially with quite a sizable net-short position still built up in the currency for large speculators as well as leveraged funds, but rates have been the key driver in the short-term. The recent violent repricing in bond markets saw a huge push lower in yields that has supported the JPY, if that continues and we also see some risk off tones keep the stretched positioning in mind as it could see a big unwind if conditions align correctly. Have a great weekend! Regards, Vitez
Long
by Vitezabraham
Has the time arrived for KIWI to appreciate VS other currencies?NZDUSD has already broken out fairly well out of its descending trendline and currently due to USD strength, it has fallen this week to around 70 cents. This fall offers a great opportunity to trade this pair LONG as the RISK TO REWARD RATIO is highly feasible TECHNICAL ANALYSIS 1. PRICE BROKE OUT OF A STRONG RELIABLE DESCENDING TRENDLINE ON BOTH DAILY AND WEEKLY CHARTS 2. PRICE ALSO BROKE HIGHER HIGH IN THE PROCESS AND NOW THE NEXT RELEVANT TARGET IS SEEN AT ANOTHER HIGHER HIGH (0.73100) 3. ASCENDING TRENDLINE ACTING AS STRONG SUPPORT TOGETHER WITH MONTHLY CONCRETE SUPPORT AT 0.7000 FUNDAMENTAL ANALYSIS ON WHY NZDUSD WILL LIKELY RISE 1. The improving conditions follow the rollback of Covid restrictions across much of the Kiwi economy. 2. New Zealand’s performance of manufacturing index (BNZ) crossed the wires this morning at 54.3 for October. That is an increase from the upwardly revised September figure of 51.6. 3. The Reserve Bank of New Zealand has plenty of ammunition to continue down the path of hiking rates, unlike its cross-Tasman counterpart, the RBA. This gives the New Zealand Dollar a comparative advantage versus the Australian Dollar. NZD rate hike bets have increased in recent weeks while the currency’s performance has lagged against the Greenback. That opens the door for a break higher in NZD/USD on the next bout of USD weakness. TO CONCLUDE Based on both technical and fundamental analysis of the current market picture, we can expect NZD to appreciate against many currencies including the USD.
Long
by FX618Analysis