It has been a horrific couple of days for NZDJPY, with the pair being hit from both sides by kiwi weakness and yen strength. As my colleague Fawad Razaqzada pointed out at the end of last week the pair is looking very weak from a long-term technical perspective and it may be heading towards last year’s low around 81.45.
In the short-term, weak food price data earlier this morning resulted in a small sell-off in the kiwi and the yen is surging ahead across the board, which has pushed NZDJPY through its 38.2% retracement level from June 2013’s low. Furthermore, given the expected thin conditions in the market today as a result of Japanese and Northern American markets being offline, it may be the perfect time for the RBNZ to sell more NZDs. The RBNZ likes to intervene in the FX market on days when volumes are expected to be low in order to maximise the effect on the NZ dollar.
However, the pair’s starting to look oversold, thus if the RBNZ doesn’t attempt to weaken the kiwi, which is possible given the recent intervention in the FX market by the RBNZ, NZDJPY may be due for a period of consolidation, at least in the short-term. Given the lack of headline economic data due to be released out of NZ and Japan in coming days, the ultimate risk-pairing may be driven by investor sentiment this week.
Source: FOREX.com
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