NZD/JPY is a flat trend with a wide range. The struggle between commodity risky and safe assets this year is quite active. On the one hand, it is difficult to imagine the most uncertain time that motivates to buy safe assets, but on the other hand, investors are attracted by the New Zealand dollar supported by the hawkish monetary policy of the RBNZ and strong macroeconomic reports in China, stimulating demand for commodity risky assets.
The New Zealand dollar came under pressure this week on the back of the New Zealand consumer price index, because inflation is lower than expected. This reduces the likelihood of a rate increase, although inflation still remains at its highest level in 30 years. At the same time, the yen was able to strengthen as Japan recorded a narrowing trade deficit and export growth is faster than import, which creates good prospects for further deficit reduction. We also note production growth of 4.6% against the forecast of 4.5%. At the same time, the yen is still weak as the likelihood of monetary policy changes remains low.
Volatility increases next week. Important macroeconomic reports are expected, such as the trade balance in New Zealand, and from Japan - the consumer price index and the unemployment rate. Most technical analysis tools indicate the effectiveness of the deals to SELL. However, we prefer Buys today given the upside potential for NZ rates and the steady upward movement since April 6th. At the same time, the flat trend is likely to continue in the foreseeable future.
