NZDJPY: stuck between a rock and a hard place

25 February, 2015

It was a hard start to the week for the NZ dollar due to the release of softer than expected inflation forecasts from the RBNZ, but widespread antipodean currency strength has helped the pair regain all of its lost ground. NZDUSD is back to pre-inflation data levels and is testing a near-term high around 0.7550. Meanwhile, NZDJPY has bounced off a key zone for price, after it was rejected by a resistance zone around its 61.8% retracement level from this year’s high.

For those that missed yesterday’s inflation numbers, here’s what you need to know:

• The RBNZ revised its expectation for inflation two years ahead to 1.8%, from 2.06% last quarter. Theoretically, this makes the chance of looser monetary policy in NZ more likely, especially given that the forecast has drifted into the lower end of the RBNZ’s target 1-3% range. However, we don’t think it tips the scales in favour of an interest cut in the foreseeable future. Policy is already loose and should be sufficiently stimulating for now. In saying that, any further downside surprises from inflation data may make the RBNZ very nervous and would greatly increase the likelihood of a rate cut in the near-term.

So, why has the kiwi been able to recover its lost ground? The kiwi has been feeding off aussie strength and positive manufacturing figures from China. China’s HSBC Manufacturing PMI jumped to 50.1 this month, beating an expected decline to 49.5 from 49.7. New orders increased at a faster rate while new export orders decreased, but it’s still a positive report overall. Although, it’s unclear whether this is due to monetary easing or a temporary boost from Chinese New Year celebrations.

Meanwhile, the yen has also been strengthening against the US dollar but not by as much as the antipodean currencies. The end result for NZDJPY has it trapped between a rock and a hard place (see chart). While it remains in this range it’s hard to pick a technical bias for the pair, but a break either way may see bears/bulls emerge and support price.


Source link  
Markets turn focus towards Trump address to Congress

On the evening of Tuesday, February 28th, US President Trump is slated to give a major address to a joint session of Congress in lieu of the usual State of the Union address...

FOMC meeting minutes signal rate hike fairly soon – dollar unimpressed

The minutes from the most recent FOMC meeting three weeks ago – the first such meeting since Donald Trump’s presidential inauguration – were released on Wednesday afternoon...

Crude oil look set to resume bullish trend

Oil prices have been coiling for several weeks now with both contracts spending most of their time in a tight four dollar range...


US stocks could rise 6-7% further before potential crash

The US stock markets hit repeated new record highs last week. The positive sentiment has continued at the start of this week, with Asian and European markets drifting higher in an otherwise quiet day. US index futures point to further gains at the open later on...

Fed gives little indication of interest rate trajectory

The Federal Open Market Committee (FOMC) meeting has come and gone, and little has changed in the financial markets as a direct consequence. In unanimously deciding to keep interest rates unchanged, as widely expected...

Surging equities at risk ahead of earnings season

While earnings season has started on a very positive footing, however, banks and other financial companies were already expected to shine more than others due to rising interest rate expectations. As non-financial companies begin to report in the coming weeks...


Gold rebound heading for major resistance

For more than two weeks, the price of gold has been in a strong rebound from its late-December bottom around the $1125 level. This rebound follows a sustained drop in price that began from the July highs around $1375 and followed-through to the December lows...

Crude oil at higher plateau ahead of US inventory data

Crude oil prices have recently been lifted to year-to-date highs on a successful agreement to cut oil production and control supply among major OPEC and non-OPEC oil producers...

Gold rebounds off key level ahead of busy week

As we reported the possibility on Friday of last week, gold did indeed fall further lower this week. The rising dollar, yields and US equity prices all weighed on the appeal of the buck-denominated, noninterest-bearing and perceived safe-haven precious metal...

  


Share: