NZD/JPY set to continue declining as risk aversion rules the Asia session

  • Kiwi sinks against Yen on Monday as trade war fears sap risk appetite.
  • Japnese political rumblings has traders cautiously dipping back into Yen safe haven.

The NZD/JPY is testing into the 77.60 level at the start of the overnight session. The Kiwi drifted lower against the Yen in Monday's trading session as risk appetite soured thanks to ongoing trade war fears, dollar weakness from floundering wage growth figures, and Japanese political tensions unnerving Asian market assets.

The Food Price Index for New Zealand came in at a -0.5% contraction versus the previous 1.2%, but with economic data continuing to middle and lean to the soft side the Kiwi barely registered the low-tier indicator. A protracted period of low to non-existent growth is largely priced in for New Zealand and expectations are running even lower as the island country's economy looks like a non-starter, lagging behind global growth trends with the Reserve Bank of New Zealand (RBNZ) set to stand pat on interest rates for the foreseeable future. The RBNZ governor, Grant Spencer, will be delivering a speech today from the central bank titled, "getting the best out of macro-prudential policy", at 23:45 GMT. The RBNZ's outlook has been surprisingly sunny despite bearish caveats, and New Zealand's central bank looks content to play wait-and-see for inflation prospects to materialize.

The Yen found some counter-intuitive buying support on Monday following revelations that key members of the Japanese parliament conspired to sell government land to private interests and forged documents to hide the names of key players on the transactions, chiefly the Prime Minister, Shinzo Abe and his wife. 

Tuesday sees little on the macro docket, much the same as Monday, with the only notable entries being the Domestic Corporate Goods Index at 23:50, followed by the Japanese Tertiary Index at 04:30 GMT. However, the Bank of Japan (BoJ) will be dropping their Monetary Policy Meeting Minutes late Tuesday at 23:50 GMT, and the breakdown of the central bank's individual members and their respective opinions could shine a light into how close the BoJ is to begin tightening monetary policies.

NZD/JPY Technicals 

The pair has recovered from a March low of 75.93 and has crossed over the 8-day EMA which is now acting as support at 77.45, though the 34 EMA presents declining resistance just above the current price at 78.25. The H4 charts show the NZD/JPY struggling to maintain momentum over last week's high of 77.65, and a further decline could see support challenged at the last swing low of 76.85.

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