The unstable political situation in the United States supports the demand for safe assets. But even without this, due to the stable economic situation and positive economic statistics, the yen is strengthening, and especially actively against commodity currencies, which are all decreasing in price.
This week the news background for the NZD was quite negative, and even news from the Bank of Japan about the continuation of a soft, stimulating monetary policy did not allow the New Zealand dollar to consolidate. The NZD was under pressure due to weak economic statistics. GDP growth in the fourth quarter was only 2.9% YoY. Thus, the GDP growth rate is the lowest since September 2014. Given the strengthening of retail sales, investors had expected GDP growth will be more significant. In addition to disappointing GDP data, the Manufacturing PMI index fell from 55.6 to 53.4 pips. Another negative signal was the data about an increase in the negative balance of current operations in the fourth quarter of 2017, and the increase in food prices amounted in February to only 0.1%. Thus, the probability of a rate hike from the RBNZ in the near future has declined, although it was low to begin with.
On the NZD/JPY chart we can see a rapid downward trend. Oscillators (MACD, Stochastic, RSI) unanimously signal that the rates are in the oversold area and there is a high probability of a price correction. At the same time, given that next week the JPY will get support from data about the trade balance, considering that at the moment the economic situation in Japan looks more convincing to investors, and that the New Zealand dollar may continue its drop due to fact the RBNZ would leave rates unchanged next week, the best would be short deals on the trend.
