The rates continue within a weak downtrend, which has almost lost its intensity. Moreover, on the chart we see signs of a new trend. The Japanese yen has been under pressure recently due to the high demand for risky assets and optimistic market sentiment. The trade conflict between China and the US is in the process of being resolved which is supporting commodity currencies.
The NZD's strengthening over the last months was mainly thanks to external factors. Last week was no exception. At the same time, the volatility was relatively low for this currency pair. The New Zealand dollar strengthened due to news from China and due to the weakness of the Japanese yen, which is not supported as a safe asset, and is also under pressure due to the economic downturn in Japan. Against this background, the RBNZ is ready to soften its already soft monetary policy. Investors expect that this can happen at the next meeting in May.
The Bank of Japan has also shown a willingness to ease monetary policy. Recent macroeconomic reports are weakly supporting the JPY, showing the continuation of the economic downturn. Thus, the index of business activity decreased by 0.6%, which is 3 times more than expected on the market. The trade surplus rose against a 2.4% drop in exports. Despite the growth of the surplus at a higher rate than expected in March, the indicator is 32.5% less than the surplus in March last year, which is a negative signal.
In general, we can say that both currencies are weak and suffer from a lack of incentives to strengthen. Perhaps the situation will change in a week, with the release of data on the trade balance in New Zealand, as well as new reports on unemployment and industrial production in Japan. We suppose that the trend reversal will not take place, and at the moment the deals to sell, in favor of the JPY, can be considered the most optimal. Most technical analysis tools, including the Stochastic oscillator, also signal the efficiency of the short deals.
