NZD/JPY Price Forecast: Bounces off 7-month low, but downtrend remains
- NZD/JPY must break above 85.03 (Tenkan-Sen) to extend recovery.
- Key resistance levels lie at 85.40 (Senkou Span A) and 85.66 (Kijun-Sen).
- Failure to hold above 84.00 could reopen the path toward YTD low of 83.15.
The NZD/JPY recovered some ground on Tuesday after dropping to a seven-month low of 83.15. The pair finished the session near 84.90 for gains of over 1%. At the time of writing, the cross-pair trades near 85.00, virtually unchanged as the Wednesday Asian session begins.
NZD/JPY Price Forecast: Technical outlook
Despite posting a bullish candle, the NZD/JPY remains biased downward, with the exchange rate hovering near the Tenkan-Sen at 85.03. A breach of the latter will expose the Senkou Span A at 85.4, immediately followed by the Kijun-Sen at 85.66. The next stop would be Senkou Span B at 86.43 on further strength.
Conversely, if NZD/JPY drops below 84.00, the next support would be the year-to-date (YTD) low of 83.15, followed by the August 5 low of 83.05, before diving to 83.00. A breach of the latter will send the cross sliding to a two-year low near April 27, 2023, a low of 81.63.
NZD/JPY Price Chart – Daily
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
Author
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
