Chart of the day - NZDJPY (29.02.2024)

10:11 AM 29 February 2024

NZDJPY is experiencing big moves today as New Zealand dollar is the worst performing G10 currency and Japanese yen is the best performing major currency. The pair trades almost 0.7% lower on the day. What is driving the move?

As we have already said, NZD is the worst performing G10 currency today. Currency's underperformance can be blamed on a speech from RBNZ Governor Orr, who said that Official Cash Rate should stay unchanged at the current level of 5.50% for the remainder of 2024. If such a comment was made by ECB or Fed chiefs, it would be seen as hawkish given that those central banks are expected to begin cutting rates this year. However, money markets were pricing in a possibility of RBNZ delivering a rate hike in mid-2024, therefore words from Governor Orr were actually dovish as he basically ruled out an increase in rates.  This has triggered a slump on NZD market.

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Meanwhile, JPY is rallying following comments from BoJ member Takata. Takata said that wage hikes offered by companies this year are bigger than in 2023. This is an inflationary factor and according to Takata, achievement of 2% inflation target sustainably is in sight. He further added that policy normalization should include abandoning of yield curve control mechanism, exiting negative rates as well as committing to overshooting inflation target.

Taking a look NZDJPY chart at D1 interval, we can see that the pair has recently pulled back from the highest level since early-2015. Pair has already dropped around 2.5% off the peak reached on February 23, 2024, and is now testing support zone in the 91.20 area, marked with previous local highs and lows. However, even a break below this area would not make technical outlook bearish immediately. This would require a break below the upward trendline (currently in 90.10 area) as well as the lower limit of the Overbalance structure (88.65 area).

Source: xStation5

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