The Japanese yen strengthened against its major counterparts this week following the rise in risk aversion, and the low-yielding currency may continue to advance against the New Zealand dollar over the following week as investors curb their appetite for high risk/reward investments.
Currency Pair: NZD/JPY
Chart: 60 Min Charts
Short-Term Bias: Flat
Analysis
The Japanese yen strengthened against its major counterparts this week following the rise in risk aversion, and the low-yielding currency may continue to advance against the New Zealand dollar over the following week as investors curb their appetite for high risk/reward investments. After reaching a high of 65.32 in October, the NZD/JPY slipped to a low of 44.23 in February and we’ve seen the pair attempt to retrace the sell-off last month, but the lack of momentum to push above 60.70-800 (78.6% Fib) paired with expectations for lower interest rates in New Zealand may continue to drag the exchange rate lower over the near-term. Over the next 24 hours of trading, we are likely to see the kiwi face increased selling pressures as the RBNZ is widely expected to lower the overnight lending rate by another 50bp to 2.50%, and if the central bank maintains a dovish outlook following the rate decision, we may see the NZD/JPY continue to retrace the advance from March, and may make a run for 52.20-30 (38.2% Fib) over the remainder of the week. Moreover, as the OECD expects the downturn in the global economy to intensify, and calls for the RBNZ to lower the benchmark interest rate to 2.00% to soften the landing of the $128B economy, the outlook for growth and inflation remains bleak, and policymakers could be force to take additional steps to steer the nation out of a recession as trade conditions falter. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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