After a long period of extremely high volatility, we observe a calm and consolidation in the rates. On the chart, we can see how a wide range of the uptrend is narrowing, and then consolidation or trend reversal awaits us.
Japan follows its own truly Japanese unique path in monetary policy, maintaining an extremely soft monetary policy. Therefore, once more, worldwide tendencies in favor of an increase in the rate were disregarded. However, in the confrontation with the New Zealand dollar, the JPY has good chances, considering decrease in interest in risky assets. This is one of the reasons for the lack of strengthening of the New Zealand dollar after the announcement by the Bank of Japan about maintaining a low rate and cutting their own GDP forecasts. Macroeconomic reports also benefit the JPY at the same time because Japan reported growth in surplus and New Zealand reported a rise in its trade deficit.
Next week, the focus will be on the ANZ business confidence index, as well as the consumer price index in Japan. Due to rising inflation, which will be seen favorably for Japan, we believe that the JPY will be able to receive support as a safe asset. At the same time, on the chart we can see how the resistance line has taken a horizontal position - this is another sign of reaching a peak and trend reversal. Therefore, today we'll be bearish in our trades. The MACD, Stochastic oscillator also signal a downward movement in the near future, which gives us more confidence in our decision to SELL NZD.
