The RBNZ is about to drop its February policy decision!
Can today’s headlines pull NZD/JPY from its weekly lows? Or will we see a downside breakout?
Before moving on, ICYMI, yesterday’s watchlist checked out NZD/CHF’s short-term range support ahead of RBNZ’s policy decision. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
CBI: U.K.’s retail sales fell by a more modest -7% in February after January’s -50% reading but sales are expected to continue falling in March
U.S. new home sales rose from a downwardly revised 651K in December to 661K in January but missed estimates of a 680K reading
In a speech, ECB President Lagarde acknowledged that “the current disinflationary process is expected to continue” but that they need to “be confident that it will lead us sustainably to our 2% target.”Japan’s core consumer inflation slowed from 2.3% y/y to 2.0% y/y in January – the slowest in 22 months – but beat estimates of a 1.8% y/y uptick
U.K.’s BRC shop price index slowed down further from 2.9% m/m to 2.5% m/m in February; “Driven by easing input costs for energy and fertiliser while retailers competed fiercely to keep prices down”
Germany’s GfK consumer climate recovered slightly from -29.6 to -29.0 in February as a rapid increase in income expectations was dulled by a willingness to save
Voting FOMC member and Kansas City Fed President Jeffrey Schmid says there’s “no need to preemptively adjust the stance of policy” and called for waiting for “convincing evidence that the inflation fight has been won.”
Price Action News
Overlay of JPY vs. Major Currencies Chart by TradingView
The Japanese yen found support during the Asian session and then got fresh legs in the early European session after Japan dropped its January national core CPI numbers.
Core CPI came in at 2.0% y/y in January, which is a deceleration from December’s 2.3% y/y increase but is still faster than the 1.8% y/y uptick that analysts had expected. Meanwhile, the “core core” index that takes away fresh food and energy prices and is closely watched by the Bank of Japan (BOJ) remained sticky high at 3.5% y/y after December’s 3.7% y/y increase.
Japan’s still-high consumer inflation fueled bets of the BOJ exiting its negative interest rate policies and pushed JPY higher.
The safe haven is in the green across the board and is seeing the biggest gains against USD, NZD, and GBP while seeing the least gains against AUD, CAD, and EUR.
Upcoming Potential Catalysts on the Economic Calendar:
U.S. durable goods orders at 1:30 pm GMT
U.S. house price index at 2:00 pm GMT
U.S. CB consumer confidence at 3:00 pm GMT
Australia’s annual inflation at 12:30 am GMT (Feb. 27)
RBNZ’s policy decision at 1:00 am GMT (Feb. 27)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
NZD/JPY: 15-min
NZD/JPY 15-min Forex Chart by TradingView
In a few trading sessions, the Reserve Bank of New Zealand (RBNZ) will publish its February monetary policy decisions.
Our RBNZ Statement Event Guide suggests that Governor Orr and his team will keep their official cash rate at 5.50% as they remain concerned about economic growth stability and high inflation pressures.
And yet, at least a few analysts are expecting an interest rate hike from the central bank. On the other side of the trade, sticky high consumer inflation in Japan is keeping alive expectations of a hawkish pivot for the BOJ.A rate hike or a “hawkish hold” may bring back buyers to NZD’s corner. NZD/JPY, which is finding support from the S1 (92.67) Pivot Point line, could attract a bullish momentum that may take the pair to the 92.85 previous area of interest.
Depending on overall risk sentiment, NZD/JPY may even break above its trend line resistance. A bullish fundamental catalyst, combined with NZD/JPY busting through the Pivot Point and 100 and 200 SMA zone, could put a move to the R1 (93.25) on the table.
Good luck and good trading this setup!
