NZDJPY gains?

The risk off markets have hit the risk sensitive NZDJPY pair hard. However, medium term there is good value here if this latest variant scare proves to be a false alarm.

The basic story is that yield differentials should support further NZDJPY gains. It is simply a case pf pairing strength against weakness The RBNZ have the highest cash rate among major central banks and look set to increase rates further. The RBNZ see the official cash rate at 0.94% in March 2022 (vs 0.86% previously, 2.14% in December 2022(1.62%), and 2.30% in March 2023 (previously 1.77%). That's the positive news. See here for a quick rundown I did on the NZDUSD pair.

In contrast the BoJ is not expected to raise interest rates any time soon. In fact some people are hoping that the the JPY carry trade is back and an extended period of JPY weakness could be ahead. The BoJ are certainly expected to stay on hold with rates for the foreseeable future

Price is around key support on the daily chart and this seems a decent enough area for some good support. The NZDJPY needed to have a pullback to offer some support for medium term buyers to stick with it. This area looks pretty solid and the 200EMA just above 77.50 should provide a decent line of defence from a technical perspective

Don't forget the seasonals

The seasonals are very solid for the NZDJPY pair. A deeper pullback is a great opportunity with tech, fundamentals, and seasonals all combining. The pair has an 85% winning streak over the last 21 years. Tax loss selling higher tends to weaken the JPY and the NZD looks oversold now post the RBNZ rate meeting. They are, after all, set on a hiking spree for the foreseeable future.


You can search the pattern here in more detail

The risk to this outlook is obvious. If the variant is transmissible, vaccine, and antibody resistant then we could find ourselves right back to square one waiting for another vaccine