There is a strong interest rate differential in place right now between the Bank of New Zealand and the Bank of Japan. The Bank of Japan, suffering from longstanding deflationary forces for years, is not anticipated to raise interest rates. The RBNZ, in contrast, is anticipating rising interest rates around four times next year. This makes for a clear case of dip-buying for investors on a pullback in the NZDJPY pair. The seasonals also signal that pullbacks could offer great value.
Over the last 10 years, the NZDJPY pair has risen 70% of the time between October 26 and December 01 with an average return of +3.77%. The largest gain was in 2014 with a 9.42 rise. The largest loss was in 2017 where it registered a -1.04% loss.
Major Trade Risks: Any significant break out of COVID-19 in New Zealand could negate this outlook as could a monetary policy shift between the RBNZ and the BOJ.