Demand for safe assets has been decreasing in recent times, despite fears of a trade war between the US and China. Investors are probably accustomed to a number of geopolitical factors and pay more attention to the economic situation in these countries. Therefore, in April we can see a tendency to increase the demand for risky assets, which negatively affected the value of the JPY.
The NZD/JPY currency pair is no exception. Despite the fact that the New Zealand economy is not in the best condition, and changes in labor legislation are adversely affecting the business, the NZD significantly strengthened against the Japanese yen. At the end of March a rapid uptrend was formed, although the previous one still has a chance to recover.
In addition to the decreasing in demand for safety assets, the JPY value declined due to the Bank of Japan's plans to continue a soft monetary policy. According to the head of the Central Bank of Japan, the country's economy is in optimal condition and is gradually growing. Good economic indicators confirm the efficiency of the current monetary policy and the need to continue it, especially given that inflation targets have not yet been achieved. At the same time, the latest data about Japan's economy has disappointed investors and decreased the probability of monetary tightening: the consumer confidence index amounted to 44.3 pips in March, that is below the market consensus of 44.6 points. Furthermore, the PMI Nikkei service index fell to 50.9 points, which is the lowest level for the last 17 months.
In general, none of the currencies have incentives for growth at the moment. Next week the situation may change - both currencies will be able to strengthen due to the release of new macroeconomic statistics. In the current situation, the most optimal would be short trades in favor of the JPY, given that Japan's economy is still in the growth stage, and may also receive support based on geopolitical tensions. In any case, we can expect a price correction in the near future, which is confirmed unanimously by the MACD and Stochastic oscillators.
