Momentum behind NZD

The NZD has been sold off fairly hard of late, as the RBNZ has not only intervened directly in the forex market, but has guided market to lower future interest rate expectations.

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Over the last five days though, the NZD is the best performing currencies in the G10 region and I am specifically looking at NZD/JPY.

I think one of the best ways to look at the trend is on the weekly chart. The 40-week moving average is headed modestly higher but if you look at the MACD (which effectively looks at a shorter period) you can see a bullish cross over the Signal line. You can also see the stochastic is moving higher, showing the momentum behind the move in the price.

We are also likely to see price close above the March high and thus print a new weekly high for the year. The bulls are clearly in control right now and the prospect that this pair trades to the 2007 pivot high of ¥97.78 looks possible over the coming months. That’s despite the fact this is a 7.5% move. The low volatility that has returned to markets has seen this pair become highly attractive again due to the high levels of carry on offer, so as long as volatility stays subdued, I expect this pair to target the 2007 highs.

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