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Since the RBNZ was surprisingly upbeat in their policy statement, I’m switching to a long Kiwi bias with this swing setup. What do you think?

Long NZD/JPY Idea

Last week, I was eyeing a short Kiwi play with the NZD/CHF double top, but recent economic events convinced me to change my stance.

The Kiwi actually turned out to be the top performer then, thanks to the RBNZ’s optimistic tone. The central bank cited that a rate hike is still a more likely next move than a cut, despite trade risks and weaker than expected jobs figures.

Meanwhile, the lower-yielding yen found itself behind the pack as risk-taking advanced during the week and Japanese reports disappointed.

NZD/JPY Daily Forex Chart
NZD/JPY Daily Forex Chart

Earlier this week, BOJ officials hinted that they could ease policy further if the yen keeps strengthening. Governor Kuroda reiterated that they’ve got tools such as rate cuts or QE at their disposal if the Japanese economy drifts farther away from the inflation targets.

This divergence in policy biases could make for a good swing play on NZD/JPY, on top of the positive carry on a long position. If risk appetite also keeps up, this pair might complete a double bottom formation and make it up to the top of the range around the 83.00 handle.

There are no major reports due from both New Zealand and Japan for the rest of this week, which could leave risk sentiment as the driving factor. In turn, this has recently been driven by developments in trade talks between the U.S. and China.

The FOMC minutes might also impact overall sentiment one way or another, as emphasis on the Fed’s plans to dial down their pace of tightening could prove positive for risk.

I’ll keep my eyes peeled for another leg higher during this top-tier event, but I’ll also stay on the lookout for opportunities to hop in on a short-term pullback.


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