- The New Zealand dollar rallied against the Japanese yen during trading on Monday, as we are hanging around the crucial moving averages of the 50 Day EMA and the 200 Day EMA.
- They are both flat, but at this point, I think you have got a situation where we will have to keep an eye on whether or not we can break out of the larger range.
The Larger Range
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The larger range for this pair is bordered by ¥87.5 on the bottom and the ¥89 level on the top. All things being equal, I believe this is a situation where we are going to continue to be very noisy, but keep in mind this is a market that once it eventually does break out, it will probably be a big mover. The interest rate differential favors New Zealand, but at the New Zealand central bank does not offer the type of interest it once did.
Risk appetite has a major influence in this pair as well, as the New Zealand dollar is considered to be “riskier” than the Japanese yen, which of course is one of the ultimate “safety currencies” around the world. With that being said, I think a lot of this will be able to be gauged by markets around the world, with the stock market being a great place to look for risk appetite. If stock market start to rally quite nicely, quite often this is a market that will rally right along with it. If it breaks down, then it’s likely that stock markets will be soft, as people will be running toward safety.
Looking at this chart, I think we will continue to play the range, and therefore I think it would be a nice range bound market for those of you who like to trade shorter term charts. Ultimately, I do think that we will have to resolve this range but right now we are nowhere near it. This does make a certain amount of sense considering we are in the summer holiday season, and a lot of liquidity is probably missing.
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