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NZD/JPY bears are probably happy campers after the RBNZ gave the markets a slight tone of cautiousness with regards to future rate hikes.  With that sentiment still fresh on traders’ minds, the Kiwi may be open to selling pressure on any bounces. That makes the descending channel in NZD/JPY one to watch ahead of economic updates from Japan and New Zealand.

Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at USD/CAD ahead of U.S. Core PCE data and the latest FOMC meeting minutes, so be sure to check that out to see if there is still a potential play!

Intermarket Update:

Equity Markets Bond Yields Commodities & Crypto
DAX: 15,878.39 -0.37%
FTSE: 7,286.32 +0.27%
S&P 500: 4,701.46 +0.23%
NASDAQ: 15,845.23 +0.44%
US 10-YR: 1.638% -0.027
Bund 10-YR: -0.227% -0.008
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Fresh Market Headlines and Economic Data:

FOMC minutes from the November 2021 policy meeting show members are willing to raise interest rates than anticipated if inflation continues to run high

U.S. Jobless claims fall to 199K, below pre-pandemic levels

Preliminary data showed U.S. GDP slowed to 2.1% in the current


U.S. Core personal consumption expenditures (the Federal Reserve’s preferred inflation measurement tool) rose by 4.1%, the highest rate since January 1991

U.S. new home sales in October rose by 0.4% in October to 745K

German Ifo Business Climate Index dips to 96.5 in November vs. 97.7 in October

Upcoming Potential Catalysts on the Economic Calendar

New Zealand Trade Balance at 9:45 pm GMT
Japan Services PPI at 11:50 pm GMT
Australia Private Capital Expenditure at 12:30 am GMT (Nov. 25)
Bank of Korea Interest Rate Decision at 1:00 am GMT (Nov. 25)
Japan Leading Economic Index at 5:00 am GMT (Nov. 25)
Germany Consumer Confidence, GDP at 7:00 am GMT (Nov. 25)
Spain Producer Prices at 8:00 am GMT (Nov. 25)
ECB Schnabel speech at 9:00 am GMT (Nov. 25)

If you’re not familiar with the forex market’s main trading sessions, check out our Forex Market Hours tool.

What to Watch: NZD/JPY

NZD/JPY 1-Hour Forex Chart
NZD/JPY 1-Hour Forex Chart

On the one hour chart of NZD/JPY above, we’ve got a pretty clear descending channel formation with the market now riding the bottom of the channel lower. Bearish sentiment got pretty strong on the Kiwi today after the expected rate hike from the Reserve Bank of New Zealand, likely some profit taking on the event and probably a reaction to the slightly cautious tone on future rate hikes. The sell off may now be running out of steam according to the oversold signal on the stochastic indicator. Is a bounce back to the top of the channel right around the corner?

Well, we do have economic data from both New Zealand and Japan in the Asia session, with the the former just releasing better-than-expected trade balance data (the New Zealand monthly trade balance was a deficit of -$1.3B vs. -$2.2B previous).  Japan will be giving traders the latest services PPI data in a couple of hours, which is expected to show 0.9%, inline with the previous read.

These aren’t normally market moving events, but if we do see a pick up in volatility and a bounce in NZD/JPY, that could draw the attention of technical traders if the market makes its way to the top of the falling channel.

In a scenario where we see a technical bounce and no major catalysts from New Zealand or Japan, then technical bears may win out and take back the market at the top of the channel. We’ll be on the lookout for bearish reversal patterns there for a potential short-term / swing position, going with the broad trend lower and rhetoric from the RBNZ that future hikes would continue to be conditional on how the economy evolves.