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Chart of The Day NZDJPY
NZDJPY Potential Reversal Zone & Probable Price Path
NZD: The soft risk appetite backdrop has seen commodity currencies a little weaker. The NZD has found the air pretty thin above 0.69, and has tracked lower, currently at its lows for the day near 0.6850.The domestic rates market had a choppy trading session yesterday, with some post-MPS positioning readjustments still evident. The net result was some evident curve flattening, with longer term NZGB and swap rates down in the order of 3-4bps, while the short end of the curve was underpinned. In a Bloomberg interview Assistant Governor Hawkesby said that negative rates are less likely if banks reduce lending rates. He commented “if the banks don’t like having a negative OCR, then passing on as much of the Funding for Lending Programme as possible through lower lending rates is going to reduce the likelihood that a negative OCR is needed”. Earlier in the day, REINZ data showed further evidence of a booming housing market, with composition-adjusted house prices up 13.5% y/y in October, with nearly 10 percentage points of that gain over the past four months. It remains a mystery why the RBNZ is desirous of even lower mortgage rates to add further fuel to the market, in the belief that it would be a good thing for meeting its objectives.
JPY: Market optimism earlier this week has given way to some caution, perhaps just a sign of some profit-taking or some realism that near-term challenges for the global economy remain. Fronting the headlines, COVID19 remains in focus, as new cases in the US hit a fresh record of 144k for the day and the hospitalisation rate is also at a record 65k. New York imposed a new restriction with bars, restaurants and gyms to close at 10pm and indoor gatherings limited to 10 people. On a more positive note, top US health advisor Fauci said that COVID19 “is not going to be a pandemic for a lot longer, because I believe vaccines are going to turn that around”. Japan added 1,661 confirmed cases of coronavirus in a single day on Thursday, a record high. Prime Minister Yoshihide Suga said that experts believe that there is no need to declare a state of emergency or stop subsidies for local travel provided by the government. In addition, Yoshihide Suga spoke on the phone with Biden, the president-elect of the United States yesterday, and expressed the hope to strengthen cooperation between the Japan-US alliance and the Indo-Pacific region. The two sides also agreed to cooperate on the epidemic. Japan’s September Tertiary Industry Index rose 1.8% month-on-month, better than expected 1.2%.
From a technical and trading perspective, NZDJPY appears to be in the first leg of a corrective phase, with the daily volume weighted average price turning bearish, as 72.20 now caps upside watch for bearish reversal patterns on the H1 timeframe to set short positions targeting a potential equality objective to 70.80/60 as the primary downside objective. On the day only a close back through 72.50 would negate the corrective thesis.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!