Daily London Session Watchlist: NZD/JPY

In the absence of major economic releases in the upcoming trading session, risk-off flows from earlier on could stick around.

Asian shares closed mostly lower as market watchers focused on China’s ban on Australian meat imports.

Before we look into catching the bearish momentum on NZD/JPY, here’s a quick look at how the majors are faring and the top headlines in the previous session:

Currency Snapshot

Fresh Market Headlines & Economic Data:

• U.S. President Trump not interested in reopening U.S.-China trade deal negotiations
• Australian NAB business confidence index up from -65 to -46
• Chinese CPI slumped from 4.3% to 3.3% vs. 3.7% forecast
• Chinese producer prices down by 3.1% vs. projected 2.6% slump
• Asian shares edge lower on fears of a second wave of the virus
• Crude oil ticks slightly higher on hints of further output cuts from Saudi Arabia
• China retaliates with import ban on four Australian meat companies
• BOJ Governor Kuroda: Central bank will do ‘whatever it can’ to beat pandemic fallout
• BOJ near-term focus to ease funding strains, no need to buy municipal bonds for now

Upcoming Potential Catalysts on the Economic Calendar:

• U.S. NFIB Small Business index at 11:00 am GMT
• U.S. CPI readings due 1:30 pm GMT

What to Watch: NZD/JPY

Market players seemed to be in no mood for risk-taking in the Asian session as China threw a jab on Australia’s meat industry.

Some say that this might be a form of retaliation on the Land Down Under’s call for an independent inquiry into the origins of the COVID-19 outbreak.

Although Beijing has denied any bad blood between the two nations, many can’t help but worry that this could be another trade war brewing. It doesn’t help that risk appetite has already been shaky on account of fears that the pandemic has a second wave coming.

But until the market mood changes, higher-yielding currencies like the Kiwi could keep taking hits.

Meanwhile, the Japanese yen could be a better safe-haven option versus the dollar since traders might be bracing themselves for the CPI figures due later in the day. Besides, the latest remarks from the BOJ suggest that the central bank pretty much has its act together.

NZD/JPY just bounced off the top of its range at the 65.80 level and there’s still plenty of room for the pair to move lower before finding a floor.

Support might be found at the bottom of the range around 63.85 or the area of interest around the middle at 64.80. Just make sure you take the average NZD/JPY volatility into account when setting exit levels!