NZD JPY

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Latest NZD JPY Analysis and Forecasts

These S&P Relative Developments Reinforce A Risk-Off Restoration

A great deal is going on in the macro department and this can make it difficult to understand where risk is flowing in broader market as well as the G-10 FX space. A constant back-and-forth between virus related risks and U.S.-China tensions is continuously squeezing equity rallies which has somewhat seeped into G-10 FX risk proxies, stalling rather buoyant rallies. We take a look at two relative ETF charts that are catching our attention and question possible resumptions in risk rallies.

SPY/GLD (S&P 500 vs. Gold)

  • Gold trades at its highest levels since October 2012, maintaining its well-established bid tone, even as the USD rallies off its lows.
  • Steepening Gold outperformance theme has caused the SPY/GLD relative to break through two bull fibo fans, which have acted as great relative sup/res lvls. This has opened the final 61.8% fib fan line.
  • A breakdown through the final line would suggest continued S&P underperformance, proposing a wider risk-off theme is potentially taking control of mkt.
SPY/GLD

SPY/IEF (S&P 500 vs. 7-10year Treasury Bond ETF)

  • SPY/IEF provides insight into Stocks performance vs. tier 1 safe haven bond mkts.
  • Mkt is breaking lower, with a slip in equities causing a breakdown through relative mean-reversion.
  • SPY/IEF has pierced to new month lows, reinforcing our work in SPY/GLD which suggests a rotation in relative risk.
  • Continued losses would suggest a broader bid in Treasury’s, potentially reinforcing a deeper risk-off tone in global markets.
SPY/IEF

WHAT THIS MEANS FOR FX:

  • Spot Gold: managing to hold above the 1765 high breakout point, opening immediate upside risks to the 1795/96 zone. This is covered by the 61.8% fib ext. and Oct 2012 high. Above here would open 1825. Fundamentally, it may support a rise in virus fears, whether it be an increase in cases/deaths or a diminishing economic outlook due to virus.
spot gold
  • We’d expect to see a JPY bid pop through with JPY/XXX being affected, namely AUD/JPY, NZD/JPY and CAD/JPY.
  • This ties in with AUD and NZD being significantly affected by the risk-aversion. 
    • AUD/JPY is the focus chart. Breakdown below 72.49 SUP and subsequent selling through 200-EMA @ 72.25 could reinforce a risk-off dynamic has poured into G-10 FX pairs and we’d suggest being short risk.
audjpy

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NZD/JPY – Live and Historical Rates

The NZD is not a major currency, while the JPY is one. The pair that these two – economically well-linked – currencies make, is not a major though, nor is it a commodity pair. The chart above illustrates the amount of JPY one will have to spend to purchase a NZD.

The NZD

The New Zealand Dollar – also known as the kiwi – was introduced in 1967, marking the split with the pound (beforehand, New Zealand had used the New Zealand Pound). Pegged to the USD, the NZD became irrevocably tied to the US economy. While the currency has been floating since 1985, the country’s economic ties with the US still make it heavily dependent on the USD. Other countries whose economies influence the value of the NZD are Japan and Australia. The economy of New Zealand is based on agricultural products.

The JPY

One of the majors, the Japanese Yen is the third most traded currency in the world and a popular reserve currency as well. Since the early 1990s, the Bank of Japan – the financial authority in control of the currency – has pushed for low interest rates on the yen. This policy has turned the JPY into a popular carry currency. Carry trading opportunities still emerge from time to time on the JPY to this day. While Japan produces plenty of silver, gold and magnesium, commodity-wise it relies heavily on trading partners such as Australia.

NZDJPY Analysis

New Zealand fits the role of a major trading partner for Japan to a T, on account of the latter’s needs for agricultural imports. During the early 2000s, the NZD underwent an accelerated inflationary process, which – given the stability of the JPY – was exploited by some investors targeting the pair. Currently, the NZD/JPY pair is not a carry pair.