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March 19th - Amid escalating tensions in Iran, the Bank of Japan maintained its benchmark interest rate. The yen rose 0.1% against the dollar to 159.64. The Iranian conflict has pushed up oil prices, exacerbating inflationary pressures in Japan, which is heavily reliant on Middle Eastern oil. The yen weakened overnight after Federal Reserve Chairman Jerome Powell stated that there would be no further rate cuts until inflation begins to decline. Sources familiar with the matter indicated that the Bank of Japan is still likely to raise rates, with the possibility of an April hike not ruled out. Market focus will shift to the press conference held by Governor Kazuo Ueda at 2:30 PM today for any clues regarding the timing of a rate hike. The recent depreciation of the yen has prompted warnings from Japanese officials. The Finance Minister stated that the authorities are fully prepared to act if necessary. However, strategists believe the threshold for intervention is high, as rising oil prices and robust US data fundamentally pushing the dollar higher may make it more difficult for authorities to find a reason to intervene.Bank of Japan: Japans economy is recovering moderately, but some sectors remain weak.Bank of Japan: We must pay attention to market trends and rising oil prices.Bank of Japan: Risks to Japans economic outlook include the situation in the Middle East, oil price volatility, and market developments, including foreign exchange rates.Bank of Japan: We must be wary of the potential impact of rising oil prices on underlying inflation.

Analysis of the NZD/USD Price indicates a continuation of gains towards 0.65

Daniel Rogers

Jan 18, 2023 15:02

 NZD:USD.png

 

The NZD/USD pair is oscillating within a narrow range near 0.6430 in the early Asian session. Despite the market's risk aversion, the New Zealand dollar has traded sideways after reclaiming the monthly high of 0.6437. In reaction to Tom Barkin's hawkish comments about the Richmond Federal Reserve (Fed) Bank, S&P500 futures are exhibiting greater losses, indicating investors' diminishing appetite for risk.

 

Following a V-shaped recovery, the US Dollar Index (DXY) has turned sideways at 102,000 and is expected to extend gains on a risk aversion theme. In addition, higher 10-year US Treasury yields would certainly provide safe-haven investments a new lease of life.

 

After one hour of consolidation, the NZD/USD pair has broken out of the Bullish Pennant chart pattern, indicating that the rising trend will continue. Participants typically initiate long positions during the consolidation period of a chart pattern, preferring to enter an auction once a bullish bias has been established.

 

Adding to the upward filters, the 20-period and 50-period Exponential Moving Averages (EMAs) have resumed their upward trend at 0.6415 and 0.6401, respectively.

 

Meanwhile, the Relative Strength Index (14) continues to struggle to enter the positive zone between 60.00 and 80.00. The occurrence of a similar event will produce bullish momentum.

 

For greater gains, the Kiwi asset must beat Tuesday's high of 0.6439, which will rocket it to December 15's high of 0.6470, then December 13's high of 0.6514.

 

Alternately, a breach below Monday's low of 0.6361 will weaken the New Zealand Dollar and push the Kiwi asset towards January 12's low of 0.6304. A breach below this level will expose the asset to more losses approaching the low of 0.6263 on December 28.

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