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Dovish BOJ View

The Japanese Yen has fallen lower at the end of the week helped by a solid drop in Tokyo CPI last month. Tokyo CPI was seen cooling to 3.3% from the prior month’s multi-decade highs of 4.3%. On the back of incoming BOJ governor Ueda recently affirming that the BOJ will not be looking to tighten policy imminently, JPY has come under fresh selling pressure with the monetary policy divergence between the BOJ and other key central banks (Fed, ECB, etc) back in focus.
 

Better Risk Sentiment

Along with the fall in CPI this week, JPY has also lost demand via the improvement in risk sentiment we’ve seen into the back end of the week. Robust data out of China over the week (CAIXIN manufacturing and services PMIs) has fuelled an uptick in optimism over the health of the recovery there which is feeding into higher equities prices and sapping safe-haven demand for the Yen.
 

NZDJPY Upside View

Against this backdrop, risk currencies have been stepping back into the limelight. NZD in particular has rallied sharply against JPY this week and with the RBNZ recently reaffirming its commitment to pressing ahead with hikes this year (albeit at a slower pace), NZDJPY looks poised for further upside near-term.
 

Technical Views

NZDJPY

(Click on image to enlarge)

The rally in NZDJPY this week has seen price breaking out above the 84.98 level resistance. This is a key pivot point of the pair, roughly marking the half-way point of the 81.45 – 87.15 range which has framed price action over the last year. If price can hold above this level, the focus is on a rotation back up towards the top of the range. 

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