The Kiwi dollar remained range-bound against the yen yesterday following the release of upbeat economic data from both New Zealand and Japan. While New Zealand’s BusinessNZ services index rebounded to expansion territory in January, Japan’s core machinery orders grew more than anticipated in December. Overall, the NZD/JPY pair traded in a range of 91.81 to 92.25 in the past 24 hours.
The BusinessNZ services index rose to 52.10 in January from 48.80 in December, reflecting an expansion of the sector at the start of the New Year. A reading above 50 indicates growth, and vice versa. The reported reading reflects the highest level of activity since May 2023. Nevertheless, it was below the long-term average of 53.40.
BusinessNZ chief executive Kirk Hope pointed out that the PSI had fluctuated between expansion and contraction for several months. The increase was led by the Activity/Sales sector, with the corresponding sub-index rising to 53, the highest level since March 2023. Likewise, the new orders/business sub-sector also recorded solid growth, with the corresponding sub-index ascending to 51.80.
The increase in activity for January also paved the way for a decrease in negative opinion from businesses, with the respective index standing at 53% in January compared with 58.70% in December.
Nevertheless, the probability of any sector recording a robust rebound into expansion territory is dependent on sustained momentum in fresh business and activity in the months ahead, in addition to additional easing in aspects related to the cost of living.
BNZ Senior Economist Doug Steel mentioned that the combined PMI and PSI activity indicator (PCI) indicates that annual GDP growth is expected to become positive soon. This is positive news for an economy that has faced challenges. However, there is still a considerable distance to cover before reaching growth rates that would prevent the economy’s spare capacity from increasing.
According to the data published by Japan’s Cabinet Office, the country’s private-sector core machinery orders, which exclude volatile ones related to ships and electric-power firms, rebounded with a growth of 2.70% m-o-m in December following a 4.90% decline in the previous month and surpassed estimates of 2.40%.
Also, Japan’s core machinery orders fell by 1% q-o-q in the December 2023 quarter.
The total value of machinery orders received by Japan’s 280 manufacturers surged 10.30% m-o-m in December. Japan’s machinery orders inched up 0.90% q-o-q in 4Q 2023.
Furthermore, in the March 2023 quarter, the cumulative number of machinery orders was projected to grow by 0.80%. Private-sector orders, excluding volatile ones, were forecast to increase by 4.60% q-o-q in the March 2024 quarter.
The upbeat data from both countries is expected to keep the NZD/JPY pair range-bound in the near term.
The historical price chart indicates that the NZD/JPY pair is ascending after testing the support at 91.25. The next resistance is anticipated to be only near 93.70. Additionally, the currency pair is trading above its 50-day moving average, while the stochastics indicator is in the bullish zone. Therefore, we anticipate the NZD/JPY pair to remain in an uptrend for the next few trading sessions.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
