The downward trend continues and given economists' forecasts about the further development of the trade conflict between the US and China, as well as forecasts for the global economic downturn this year, it is unlikely that it will be completed in the foreseeable future. The Japanese yen, like the currencies of other leading countries, will also be under pressure, but will receive significant support as a safe asset in case the situation changes from the forecasted scenario. The New Zealand dollar, being a commodity currency, will be the most vulnerable, with a decrease in demand for raw materials or its value because it will have a negative impact on the export potential of New Zealand, the balance of the country's trade and business activity.
Despite the long-term negative forecasts, in January we see a rapid upward movement in favor of the NZD. This is due to a number of objective reasons, including, first of all, the continuation of the trade negotiations between the US and China and Donald Trump's optimistic attitude towards reaching certain agreements. In addition, this week data were obtained on the economy of New Zealand, which showed signs of improvement. For example, the PMI index of business activity in the industrial sector reached 55.1 pips in December - the highest value in the last 8 months.
On the contrary, the economic situation in Japan has disappointed investors this week. The Bank of Japan announced the continuation of a soft monetary policy, as well as a change in the inflation forecast for the year to 0.9% due to the reduction in the cost of energy. The 2% inflation target, at the same time, didn't change. As a result, the increase in demand for safe assets this week had a slight impact on the JPY rate.
Given the high risk of recession in the global economy, as well as the already existing economic downturn in China, the recent strengthening of the NZD can be seen as another price correction that fits perfectly into the current downtrend. The most optimal in the medium and long term can be considered the deals to sell. In the short term, it's still possible to get a profit with deals against the trend, as indicated by the Stochastic and MACD oscillators.
