The rates for this currency pair have been stable since March. We observe a flat trend on the chart, with a range of 63.181-65.975 JPY. At the same time, the support and resistance lines have been repeatedly tested. Nevertheless, the rates still continue in the consolidation phase. How does a commodity currency successfully resist a safe asset that is popular among investors in the context of the global economic crisis and recession?
The secret to the force of the New Zealand dollar lies outside of New Zealand - in China, where the coronavirus pandemic has actually ended, unlike in the US and Europe. In addition, it should not be forgotten that New Zealand is an exporter of food, not oil, and therefore is under less pressure from lower commodity prices, but not food prices.
This week, the strengthening of commodity currencies continued amid expectations of a global economic recovery. The NZD received the most support with the publication of data on the trade surplus in China, which grew 7.1 times more than expected in April, and twice more than in March. Also, the price of the NZD was affected by news from Australia, where the trade surplus and exports also grew. Investors certainly look forward to next week's meeting of the RBNZ, at the end of which the interest rate will most likely remain at 0.25%, which will support the NZD. They also anticipate the report on industrial production output in China a week from today, which will serve as an indicator of China's needs for raw materials.
The Japanese yen can only get support as a safe asset in case of a negative progress in the coronavirus pandemic. There will be no support from domestic factors because the Japanese economy continues to be in a recession, as evidenced by the latest data on business activity, at the level of indicators 11 years ago.
In the current situation, we believe that the deals to BUY will be the most effective in the near future. Most technical analysis tools also recommend the deals to BUY. Entry points can be found at the levels 63.181 and 65.975, the breakout of which will signal a change in the trend.
