The JPY has recently lost its position amid a strong dollar and aggressive monetary policy in the US. Investors are disappointed by the weak economic growth in Japan, but even more, they are not satisfied with the extremely soft monetary policy of the Bank of Japan. Therefore, there is a growing tendency on the market: the Japanese yen as a safe but profitable asset is losing its attractiveness.
The negative sentiment on the market was noticed by the Bank of Japan, which became less categorical about the reduction of the financial incentive program. In any case, the Japanese yen still feels confident against an even weaker New Zealand dollar. So the downward trend which began a year ago continues without signs of completion. In early July the rates reached a two-year low, then retreated amid negative sentiment around the JPY. Weak data about inflation in June, as well as the fall of the manufacturing PMI index to 51.6 points had a negative impact on the JPY's value.
At the same time, the economic statistics of New Zealand have a greater negative impact on the NZD. Since last week the rates continued in favor of the JPY after the New Zealand services PMI index was published. The index has achieved a 66-months minimum, amounting to 52.8 points in June. Today statistics from New Zealand continued to show a slowdown in the country's economy: the trade balance again became negative, unexpectedly for the market by -113 million NZD, while investors expected a surplus by 200 million. At the same time, imports increased by 12.9%, while exports by only 4.6%, i.e. 3 times less than imports, which in the future makes an additional burden on the trade balance of New Zealand.
Next week volatility will remain high. At the end of the month a meeting of the Bank of Japan is expected. In addition, New Zealand's employment market data will be published. In the current situation, the most optimal in the medium term would be short deals on the trend, despite the fact that the Stochastic oscillator indicates the efficiency of opposite trades considering the rates in the oversold zone.
