This week, the US dollar against the yen reached its highest level in the last 34 years. What is the position of the yen in confrontation with the much weaker New Zealand dollar, you will see right now in this review.
As it turns out, the situation for the yen vs NZD is not much better. On the chart we observe that quotes were higher than now only 10 years ago, and the current upward trend was formed 13 months ago. The Bank of Japan is threatening currency interventions and is no longer convincing anyone that a cheap yen is good for the economy. However, threats remain threats, and the rates continue to reach highs. As we said, nothing extreme is happening for NZD/JPY, but hitting a 10-year high doesn't happen every day. In this situation, traders are wondering whether they should expect a trend reversal, because the higher the quotes, the higher the likelihood of a reversal.
The NZD received support this week after a series of macroeconomic reports showed a trade surplus had been achieved, and as the risk of a big war in the Middle East decreased.
The main event this week is the Bank of Japan meeting on Friday, at which there is a possibility of raising the interest rate against the backdrop of a falling yen. Although officials previously denied the possibility of rate changes just to strengthen the currency, they may take this step. Maintaining the rate will definitely disappoint investors and further weaken the Japanese currency. However, currency intervention is also likely after the regulator’s meeting or following its results.
Most technical analysis indicators show us the effectiveness of further purchases, but they cannot take into account the high probability of a rate change or foreign exchange intervention. Either way, the Bank of Japan is irritated and may be hawkish this time. We believe that, as often happens at highs, consolidation or a trend reversal awaits us, but we also cannot rule out testing the highs of 2014, recorded at 93.537. In this situation, we recommend opening Sell trades closer to Friday, since the fundamental component will be decisive.
