NZD/JPY remains stuck in its multi-week range of 76.84-73.54 although recent signs point to a test of the downside ahead.
- Data on Monday showed that NZ confidence and building consents deteriorated significantly bolstering the case for more RBNZ easing in the upcoming month.
- There is scope for RBNZ to ease twice this year, but markets have fully priced in only one cut, making further downside vulnerable.
- On the other side, the Japanese Yen remains in demand on the back of the extension of risk-off trades amidst poor Chinese data.
- Technicals are inconclusive, immediate resistance is seen at 74.97 (5-DMA) and then 75 (10-DMA).
- 73.60 is strong trendline support on the downside, and breaks below could accentuate downside, test of 73.20 and then 72.42 levels then likely.
Recommendation: We remain on the sidelines for now, await further confirmation to go short.
