The rates continued in the frames of the uptrend, although in January we observed a consolidation. However, January is traditionally a low-volatility month, and in February, or next week, investors expect the publication of the PMI business activity indices in China, which are a key indicator for the NZD/JPY, and, of course, data on the employment level in New Zealand is also expected.
This week, the New Zealand dollar remained under pressure not only due to the slowdown in the Chinese economy and concerns about new coronavirus cases in China, but also due to the sharp reduction in the trade surplus from 290 to 17 million NZD in December. Imports rose by 4.2%, while exports fell by 2.7%, which led to a fall in the surplus. In general, Asian assets this week showed a decline and the New Zealand dollar was no exception.
Despite the weakening of the NZD, the yen failed to strengthen significantly. Demand for safe-haven assets rose this week, but the yen was under pressure given the Bank of Japan's disappointing forecasts at its meeting on Thursday. The rate was left unchanged, but the regulator signaled the unstable state of the economy due to the pandemic. The latest economic reports show a stable unemployment rate at 2.9%, but a decline in industrial production output in December, as well as a decrease of the PMI index of business activity in the service sector from 47 to 45.7 pips. The drop in the service sector is observed for the third month in a row.
In the current situation, we believe that the deals on the trend will be effective for the NZD/JPY. Most technical analysis tools also indicate the effectiveness of the deals to BUY in the medium term.
