- The NZD/JPY marches firmly upwards gains 0.98%.
- Central bank policy divergence between the RBNZ and the BoJ favors the NZD.
- NZD/JPY Price Forecast: The double-bottom in the daily chart targets 80.00.
The NZD/JPY pair surges as the New York session ends, trading at 78.65 at the time of writing. Risk-sensitive currencies like the New Zealand dollar advanced against safe-haven peers, sharply against the low-yielder Japanese yen, as market participants’ mood deteriorated as the Wall Street’s session progressed.
Despite the aforementioned, NZD bulls keep in control. The NZD/JPY is a pure risk-sentiment play. However, it coincides with central bank divergence between the Reserve Bank of New Zealand (RBNZ) and the Bank of Japan (BoJ) at the time of writing.
In November’s meeting, the RBNZ decided to raise interest rates by 25 basis points, leaving the bank rate at 0.75% while eyeing the Official Cash Rate (OCR) at 2.60% by the end of 2023. Contrarily, the BoJ would keep rates unchanged for the foreseeable future, and although the emergency pandemic stimulus was scaled back, they extended it for smaller firms until March of 2022.
The challenge for NZD/JPY traders would be the assessment of the risk sentiment, which is greatly influenced by China. The Omicron variant and the Covid-zero policy maintained by China could undermine appetite for riskier assets, so in that event, the Japanese yen might appreciate.
Therefore, it is recommended for NZD/JPY traders to keep an eye to global equities, Chinese developments, and the Volatility Index (VIX) for clues that would help them position themselves, depending on the risk-market mood.
NZD/JPY Price Forecast: Technical outlook
The NZD/JPY daily chart shows a double-bottom formation. Furthermore, at press time, the “neckline” of the chart pattern confluences with the 200-day moving average (DMA) around the 77.96-78.03 range, which NZD bulls are likely to defend as the double-bottom targets 80.00.
To the upside, the NZD/JPY first resistance would be 79.50. A breach of the latter paves the way for further upside. The following line of defense for JPY bulls would be the double-bottom target at 80.00, followed by November 5, 2021, a daily high at 81.34.