Markets

NZD - JPY: Strong Bearish Signals

1- New Zealand Economy

Let first look at the economic data from last month. Here are positive and negative notes that have had an impact on NZDJPY forex trading strategies:

Positive stuff

  • New Zealand’s Q3 2015 GDP grew faster than Q2
  • New Zealand economy seems to be doing well enough
  • Businesses remain rather optimistic

Negative stuff

  • New Zealand’s annual GDP reading has been slowing down
  • New Zealand has a rather severe inflation problem
  • Kiwi's strength end of 2015 made imports relatively cheap, inflicting broad deflationary pressure on New Zealand’s economy
  • Labor force participation rate is declining
  • Wage growth is very weak

Smash! With negative stuff outweighing the upbeat data, the Reserve Bank of New Zealand (RBNZ) seems to have been justified in cutting rates. Especially since most of the negative data could affect inflation down the road.

After RBNZ Graeme Wheeler’s jawboned the Kiwi, he said “a decline would be appropriate” which threats further rate cuts.

This week on New Zealand economy we are awaiting the Global Dairy Price Index (GDT) of Tuesday followed by its quarterly GDP on Wednesday at 9:45 PM GMT. These could further impact the Kiwi in a negative way if the numbers are printed lower than expected.

2- Japan Economy

Last month Bank of Japan (BOJ) caused a few spikes in Yen forex dance floor. It surprisingly cut its benchmark interest rate. And finally joined the ECB and SNB in implementing a negative interest rate policy. BOJ Governor Kuroda cited worries over inflation, China, and the global economy as reasons for their aggressive moves.

Today, BOJ removed language from its statement that it would cut interest rates further into negative territory if needed. In other words, they offered no hints of further stimulus expansion. With that, any hopes for weaker Yen was also removed. So Ms. Japanese Yen got even stronger versus her major dancing partners. This gave us further clues about our NZDJPY forex trading strategies March 2016.

3- NZD/JPY Technical Analysis

Now that we've crushed the fundamentals, let's see what the technical point of the Invest Diva Diamond suggests for NZD/JPY:

Big Picture Monthly Chart: The pair is currently right in the middle of the ichimoku cloud. It is testing the 38% Fibonacci retracement level at 74.70. March candlestick appears to have lost its bullish momentum. The pair might be forming a saucer topchart pattern, moving towards lows of 2012.

Daily Chart Market Sentiment: The pair remains below the ichimoku cloud. The bearish sentiment is more obvious in the shorter time frame. The 74.70 level seems to be a great barrier to break through.

4- NZDJPY Trading Strategies

As a savvy Invest Diva student you should already be able to put the two and two together and come up with your own NZDJPY Forex Trading Strategies. But for our newbies and first time visitors, let me elaborate.

Based on fundamental analysis, we can see relatively heavier bearish sings for NZD. On the other hand, JPY seems to continue with its strength. So far this is the recipe for a bearish outlook for NZD/JPY, because the strong currency in the pair (JPY) is quoted second.

Why Japanese Yen Comes SECOND in NZD/JPY? Watch Video

Bearish scenario: The key level to keep an eye on is 74.70. A break below this level could open doors for further drops

Bullish scenario: We would need a 1) strong data from New Zealand Economy, and 2) a stimulus, rate cut or QE from Japan economy at the very least. From a technical point of view, the pair needs to break above the pivot level of 78.50

Summary: There are a number of factors that back up a bearish scenario for NZD/JPY. However the downside of this outlook is the negative roll over fee for a sell NZD/JPY position. This would make it riskier for long term traders to hold their position until they hit the bearish target at 69. If you have any doubts on how to apply these strategies to your stocks and forex portfolio, come visit me at an investment coaching session. Book soon as we are running out of spots.

Here are the important NZD/JPY levels to keep an eye on:

Support Levels Turning Point Resistance Levels
74.70 74.70 78.50
69 78.50 81.70

I'm also looking at Euro, USD and GBP crosses this week ahead of FOMC. Join me for an overview this week.

This article was originally published on InvestDiva.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Kiana Danial

Kiana Danial is an award-winning, internationally recognized personal investing and wealth management expert. She is a highly sought-after professional speaker, author and executive coach who delivers inspirational workshops and seminars to corporations, universities and entrepreneurial groups. She is a frequent expert on many TV and radio stations and has reported on the financial markets directly from the floor of NYSE and Nasdaq. She is a weekly investment expert guest on Tokyo’s #1 Investment TV Show. She has been featured in The Wall Street Journal, TIME Magazine, CNN, Forbes, The Street, and numerous other publications. Kiana’s book "Invest Diva's Guide to Making Money in Forex" was picked by McGraw-Hill only two years after she first moved to the US, and was an immediate domestic and international success. At a young age, she has won numerous awards including Best Financial Education Provider at Shanghai Forex Expo in 2014, New York Business Women of Influence Honoree in 2015, and Pro Bono Humanitarian Award by IA Bar Association in 2013. Born and raised in Iran to a Jewish family as a religious minority, she was awarded a scholarship from the Japanese government to study Electrical Engineering in Japan, where she obtained two degrees in Electrical Engineering and researched on Quantum Physics in classes conducted in the Japanese language. Being the only girl and foreigner in her classes made her decide to dedicate her life to empowering minorities, especially women in male dominated industries. As the CEO of Invest Diva, Kiana’s goal is to empower and educate women to grow their wealth by investing like a ROCK STAR.

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