Market Spotlight: NZDJPY Upside Risks Into RBNZ

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Japan’s CPI Jumps Again. The BOJ’s commitment to maintaining a light presence in the market is further tested this week. The latest eco data shows that Japan’s CPI hit a four-year high last month at 2.7%, up from the previous month’s 2% reading and well above the 2.2% reading the market was looking for. Annually, CPI rose by 3.6%, above the 3.5% increase that the market was looking for, marking the fastest pace of inflation since 1982 in Japan. Japan’s CPI has now spent seven consecutive months above the BOJ’s 2% target, raising serious questions about central banks’ easing strategy. On the back of the data, BOJ Governor Kuroda was quick to reaffirm the bank’s commitment to keeping rates at extremely low levels. to support the economy. However, Kuroda did acknowledge that price increases were significant and subject to further risks in the near future. Speculators against BOJ Despite the BOJ’s attempts to support JPY, the currency has weakened again recently creating further upward pressures on the domestic economy. With defaulters essentially pitted against the BOJ, JPY looks vulnerable to further deterioration as the BOJ refuses to budge on rates, regardless of other tactics such as FX intervention.Technical ViewsNZDJPYNZDJPY is stalled against the 87.15 – 87.88 level resistance since Q1, despite several attempts. on breaking higher. Price is now rising again against the level and with the retail market very short, risks of a top break are growing, especially with the RBNZ head tonight. If NZDJPY breaks above current resistance, 89.12 will be the initial target in the move with the near-term focus remaining bullish while price holds above 87.88.

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