NZD/JPY – Headed for 90?

NZD/JPY – Headed for 90?

NZD/JPY – Headed for 90?

This afternoon the Reserve Bank of New Zealand left interest rates unchanged and told us that they see a prolonged period of interest rate stability. While this is far from the hawkish view that is typically needed to lift a currency, in an environment when investors are worried about who will cut rates next, their steady outlook proved to be extremely positive for NZD/JPY. The currency pair’s gains could be extended if tomorrow’s U.S. retail sales report surprises to the upside. We believe that the February spending numbers will most likely reinforce the attractiveness of the greenback as higher non-farm payrolls, the rise in gas prices and increase in spending according to Redbook point to a stronger report. The Federal Reserve is gearing up to raise interest rates and regardless of whether it comes in June or September this prospect should continue to be extremely positive for USD/JPY and in turn NZD/JPY.

Taking a look at daily chart, the next level of resistance is at 89 the 50% Fibonacci retracements of the December to February decline. Then above that will be the big psychological resistance of 90. As long as NZD/JPY holds today’s low of 87.25, the turn is intact otherwise the currency pair could slide down to the 23.6% of 86.45.

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