Background
The New Zealand dollar remains under pressure after the market got caught out by a more dovish than expected statement from the Reserve Bank last week (see Kiwi slumps as RBNZ maintains neutral stance on monetary policy).
The only Kiwi dollar specific data point this week is tomorrow’s dairy trade auction. Futures pricing suggests another small price rise which would support NZD but not give it much of a boost.
In Japan we have industrial production and the first quarter GDP number. The growth number would have to beat expectations of 0.4% by a margin to independently influence JPY. Of late, the US 10-year bond yield has been the driving force behind USDJPY.
For the past 20 months, NZDJPY has been forming a potential classical charting Inverse head and shoulders reversal formation; whereupon a sustained break above Neckline resistance (currently about ¥83.90) would yield a minimum upside objective of ¥97.40.
In the short term, support now lies at ¥78.00/¥77.60 and whilst this holds, the outlook is bullish, for rally toward ¥80.50; en route to pivotal ¥83.90 resistance in the days/weeks ahead. With such huge upside potential (especially relative to stop loss risk – see below) NZDJPY must surely be a candidate for (potential) “trade of the year” ahead.
Entry: Today: NZ dollar is seen a buy at market (¥78.40) and
again at ¥78.05, if seen .
Source: ThomsonReuters
Source: ThomsonReuters
— Edited by Robert Ryan
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