Over the past month the situation has not changed for this currency pair. The rates are close to 7-year lows, but at the same time, the New Zealand dollar does not find enough incentives for strengthening. In addition, both currencies are strongly influenced by external factors, and economic reports become secondary to investors.
This week demand for safe assets rose significantly. The JPY is strengthening against all major currencies. The most important macroeconomic reports did not have a negative impact on the yen in any case, although inflation in Japan is slowing, and exports are declining for the sixth consecutive month. The Bank of Japan can further stimulate the Japanese economy, but the JPY will not lose its position amid the development of the trade conflict between China and the United States, nor due to the recession in the world economy, because all other currencies will also be weakened in this case.
The New Zealand dollar lost its position this week, under the influence of the development of the trade conflict. The NZD and the AUD are commodity currencies, strongly dependent on the situation in China, and the latest reports on the Chinese economy indicate the negative impact of the trade conflict with the United States: the growth rate of production in May is falling to the lowest level in the last 17 years, imports of raw materials to China are declining, and so are investments in the Chinese economy. This causes panic sentiments on the market, reinforced by new threats from Donald Trump to China on the introduction of duties.
Next week will be the key for the NZD/JPY as we expect reports on New Zealand's GDP, the balance of trade in Japan, as well as the meeting of the Bank of Japan, the results of which may cause the JPY to temporarily lose its position, given all the reasons for a further easing of Japan's monetary policy. External factors will have a lesser impact on the quotes, given the lack of macroeconomic reports on the Chinese economy. However, the efficiency of short deals is confirmed in the medium term by most technical analysis tools. There is every reason to suppose that the pressure on New Zealand's economy will increase. Japan also depends on the export of goods to China, but the yen is winning due to its status of a safe asset. In this situation, we suppose that the most effective would be the deals on the trend. At the same time, a short-term price correction is not excluded in the near future. Therefore, in the short term the deals to Buy can also be relevant.
