The rates continue within the downward trend. Both currencies have recently been under pressure due to problems in the economy, and the NZD has also been exposed to the negative impact of the trade conflict between the US and China, as well as due to the prospects of slowing global economic growth.
Starting this year, the NZD was stronger compared to the JPY. This was possible thanks to some progress in trade negotiations between the United States and China, the truce reached between them and the postponement of the final date of completion of the negotiations. The situation in the economy of China and Australia did not negatively affect the NZD, and investors' appetite for risky assets continues to grow. However, the perspective for the NZD is doubtful. When the reduction of global risks to commodity currencies is taken into account, economic reports are key, but the New Zealand economy seems weak. The latest data on the country's trade balance shows the growth of the deficit at a more significant pace than expected by investors. In January the trade balance amounted to 914 million NZD, which is 3 times higher than the projected level of 300 million NZD. Exports rose in January by only 3%, while imports - by 7.7%, which in the future may increase the growth of the trade deficit.
The situation in Japan continues to disappoint investors. Inflation slowed to 0.2% in January, which frankly does not please the Bank of Japan. The probability of an increase in the interest rate in the foreseeable future is close to zero, moreover, the Bank of Japan can further decrease the interest rate for a better stimulation of the economy. The manufacturing PMI index of business activity fell in February to 48.5 pips - the lowest in 15 months. The PMI index below 50 points by default is regarded by investors as a sign of serious problems in the economy of any country.
Despite the significant strengthening of the NZD, we do not see any signs of trend change. Moreover, the latest growth of the rates looks like a standard price correction, which is already completed. The Stochastic and MACD oscillators point to the efficiency of the deals in favor of the JPY, which may receive support next week with the release of Japan's GDP data for the fourth quarter of 2018.
