New Zealand Q3 inflation has risen at its fastest pace in 10 years with the annual inflation rate move up to 4.9% from 3.3% in the second quarter. This has caused the New Zealand bond yield to rise sharply higher as expectations now increase for a 50 bps rate hike at the next RBNZ rate meeting. The sharp fall in the JPY last week was due to all the world’s central banks being expected to raise interest rates to counter surging inflation. The one central bank that is not expected to respond is the BoJ. Their yield curve control keeps Japanese bond yields low and the deflationary forces Japan faces are expected to keep the BoJ on hold. However, remember that the BoJ is starting to see some small signs of inflation now. The obvious place to look for buyers would be from a retracement down to the 78.50 i.e a bit above 50% Fib retracement level. If price retraces here it would be reasonable to expect buyers on the strong diverging outlook between the RBNZ and the BoJ. 

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES :

New Zealand Dollar has defeated some strong resistance zones and has entered an over whelming overbought conditions on the daily and interday charts as we can witness the relative strength index being helpless against the bullish fundamentals on kiwi. The bulls are still looking forward to reaching for major monthly resistance at 84.20, from there onwards we can expect a strong bearish pull back for correction. From the current market scenario, if the NZDJPY lost its hawkish tone due to being overbought in the relative strength index on interday and daily charts, there is a possibility of diving towards 80.0 and 78.50 price action before making any highest high on the daily chart. 

NZDJPY

Oct 19 2021