We recently did an article in terms of NZD/JPY and expected a heavy sell-off which has unfolded – we have confirmed a trend reversal to the downside and expect far more downside logic of our view in the article below...

You can read our previous article in terms of NZD/JPY on this link: Click Here to View

Sentiment

Despite the big fall in NZD/JPY large speculators remain heavily long holding 8 to 1 in terms of longs over shorts while smart money commercial hedgers hold 7.5 to 1 in terms of shorts over longs so why do speculators remain so heavily bullish?

Interest Rates

The NZD has a high yield and the RBNZ has an interest rate of 5.5% which is one of the highest in terms of a G7 country on the other hand, the Bank of Japan's interest rate is held at around 0% to 0.1% but carry traders are now exiting the market and will continue to do so the speculative long position was too big and it's now getting taken out on stop.

We think the Bank of Japan will soon tweak interest rates higher and the RBNZ will cut interest rates in the coming months which will push the NZD further to the downside. We also think, high risk appetite is about to end...

Risk Sentiment

The NZD has been supported by strong equity prices which we expect to end and also a bullish view on China one of New Zealand's most important trading partners but as we noted earlier today in our outlook for the AUD this bullish view is about to end.

The trend in NZD/JPY is now down and has far further to run to the downside in our view.

Technical Analysis

A major trend reversal has been confirmed and while we may see a bounce in the short term the big trend is now down and has far further to run – Our view of the key levels of support and resistance to look out for are below...