NZD/JPY – Aiming for Fresh Multi-Year Highs

NZD/JPY – Aiming for Fresh Multi-Year Highs

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Fundamentals

With the Reserve Bank of New Zealand expected to raise interest rates for the first time in years, NZD/JPY is poised for a big move this week. Most traders are positioned for a move higher in the currency pair and we believe that new multi-year highs are likely especially with last Friday’s non-farm payrolls report triggering renewed upside momentum in USD/JPY. Given that everyone expects the RBNZ to tighten, the upside in NZD is dependent on the central bank’s guidance. If they suggest that this marks the beginning of a longer period of tightening, NZD/JPY will soar. If they sound noncommittal, say that future movements are data dependent and complain about the strength of the currency, NZD/JPY could experience the classic buy the rumor sell the news type of post RBNZ price action. Considering that the central bank sees rates at 4.75% by March 2016 (current rate is 2.5%), we think that Governor Wheeler will reiterate his commitment to normalizing monetary policy, which is positive for NZD/JPY.

Technicals

The closest level of resistance for NZD/JPY is Friday’s high of 87.95 and beyond there, we need to turn to the monthly chart for further resistance. The psychologically significant 90 level comes next followed by the 2007 high of 97.77. Support in the currency pair is at 86, the former resistance turned breakout level.

EUR/CAD – Poised for New Multiyear Highs?

EUR/CAD – Poised for New Multiyear Highs?

Chart Of The Day

Fundamentals

With German unemployment and consumer prices scheduled for release along with Canada’s current account balance, EUR/CAD is in play over the next 24 hours. We know that Germany is the locomotive of Eurozone growth and according to the latest PMI report February was the strongest month for job growth since January 2012. As for inflation, German CPI is expected to increase sharply in February after falling in January and a rise in price pressures will ease the central bank’s concerns about low inflation. If German unemployment falls more than expected and CPI rises by 0.6% or more, it could drive EUR/CAD to its year to date highs. As for Canada, the last few months was particularly tough for the Canadian economy with trade activity and foreign investment weakening. This leads us to believe that the current account deficit widened in the fourth quarter, which would be negative for the Canadian dollar and positive for EUR/CAD.

Technicals

From a technical perspective, the uptrend in EUR/CAD is very clear. Having broken above 1.52, a former resistance level, the currency pair now appears poised for a test of its 4 year high of 1.5346. If this level is broken, the next area of resistance will be at 1.5455, the 61.8% Fibonacci retracement of the 2008 to 2012 sell-off. Support is at 1.5150 and below there the psychologically significant 1.50 level.