Strong Q1 Retail Sales, Dairy Prices Keep Kiwi Bullish

Strong Q1 Retail Sales, Dairy Prices Keep Kiwi Bullish

On April 24th, we had advised Forex traders to open a long position in the NZDJPY pair near 76.90, and book profit at about 78.40. A call option valid for a period of one week was recommended for binary traders. As forecasted, the pair shot up to violate the forecasted target levels. The NZDJPY pair, which is currently trading at 77.50 levels, is expected to rise further due to the reasons given below.

Yesterday, in the global dairy auction conducted in New Zealand, the average price of dairy products increased to $3,313 per ton. The GDT index rose by 3.2%. More than 95% of dairy products produced by the New Zealand are exported worldwide and China is the major consumer. Thus, an increase in the price of dairy products is considered to be favourable for the Kiwi dollar. Notably, the price of dairy products has increased for the fifth time in a row.

Earlier on Monday, Statistics New Zealand reported a 1.5% q-o-q increase in retail sales in the March quarter. In the previous quarter retail sales grew 0.6%. Analysts had anticipated only a growth of 1.1% in the recent quarter.

In Japan, the loan growth in April was flat at 3% on y-o-y basis. The figure reported by the Bank of Japan was lower than analysts forecast of 3.2% growth.

In the recent monetary policy meeting on April 26-27, the BoJ decided to leave the short-term interest rates unchanged at -0.1%. Additionally, the central bank also pledged to keep the 10-year government bond yields close to 0%. While issuing an optimistic assessment of the economy, the BoJ also clarified that it would continue with the accommodative policy for some time. Thus, increase in dairy product prices, interest rate differentials, and strong retail sales data are expected to keep the NZDJPY pair in an uptrend.

The NZDJPY pair is forming a bullish ascending triangle pattern as shown below. Minor resistance exists at 79.40, while the major resistance is at 80.70. Additionally, the stochastic oscillator is in the bullish zone. This confirms a strong buying momentum. Thus, we can expect the currency pair to reach the next resistance level in the days ahead.

NZDJPY - Technical Analysis - 17th May 2017

A long position in the NZDJPY pair can be created in the Forex market. The entry price should be near 77.60. To reduce risk from unexpected reversals, a stop loss order can be placed below 77. The long position can be sold near 79.40.

The trade setup advised for the Forex market can be mimicked in the binary market by investing in a call option. The option should be bought when the pair trades near 77.60 in the OTC market. The trader should also opt for an expiry period of one week.

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