The Kiwi is the top performing currency in the G10 so far today and is up across the board. The chief driver of Kiwi strength is the better than expected February trade balance, which jumped to its highest level in nearly three years. This could further improve New Zealand’s current account balance, which is currently NZD 1.43bn in deficit. As we have said before, a strengthening balance of payments position can be good news for a currency as it suggests economic health.
The chart below shows NZDJPY and New Zealand’s trade balance, as you can see, this currency pair tends to move in the same direction as the trade balance. NZDJPY could also be getting a boost from the weakening trade position in Japan. Whereas in New Zealand the trade balance is in a multi-year surplus, in Japan the trade balance has reached a record deficit.
What does this mean for NZDJPY?
The fundamental picture is still positive for this cross as the relative trade position and contrasting central bank stances of the RBNZ and BOJ are NZD supportive for now.
From a technical perspective, the daily RSI is at 70.00, which suggests this pair is oversold and could be due a pullback.
We could see a shallow pullback in the short-term, key support lies at 88.31 – Wednesday’s high, then 87.30 – today’s low.
If the fundamental picture holds then we could see further upside in NZDJPY, 100.00 is a key psychological level of resistance and the highest level since 2007.
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