The New Zealand dollar has seen a period of strength since the last RBNZ meeting. In that meeting the RBNZ board made an even more hawkish shift seeing the potential need for further interest rate hikes and raised the terminal rate to over 3.00%. This should keep the NZD supported over the medium term.

The Japanese Yen has three reasons for weakness at the moment. Low Japanese inflation is unlikely to worry the BoJ, high oil prices pressure the net energy importing Japanese economy, and the BoJ’s monetary policy is keeping 10-year yields pinned in the +0.25% and -0.25% band.

The NZDJPY pair has a strong seasonal pattern right now. Over the last 22 years, it has gained 16 times for an average 1.79% return. The largest gain was a huge 13.72% in 2009 and the biggest loss was -4.41% in 2017. Will the NZDJPY pair show strength again this year?

Major Trade Risks: The main risk here is that risk-off trading on geopolitical concerns over the Russian/Ukraine crisis results in further risk-off selling.