Chart of The Day NZDJPY

Chart of The Day NZDJPY

Chart of the Day NZDJPY

NZDJPY range support – Probable Price Path

Fear and greed may continue to battle for the mindshare of investors as US-China trade tensions return to the fore amid growing concerns that key nations are also racing to obtain first rights to any Covid-19 vaccine. Japan also slipped into a recession as 1Q20 growth contracted 3.4% annualised qoq, whereas China’s industrial production had surprised on the upside at 3.9% yoy even though retail sales (-7.5% yoy) and fixed asset investments (-10.3% yoy) remain weak. Meanwhile, India also extended its lockdown until 31 May even as Italy, Belgium and Portugal prepared to lift some restrictions. Separately, China and South Korea have also requested Japan to allow business travel. The S&P500 rose 0.39% on Friday with VIX lower at 31.89, while UST bonds drifted lower amid a steepening bias as the 10-year yield rose to 0.64%. The 3-month LIBOR stood at 0.38050%.

Economies around the world continue to take cautious steps towards reopening. Italy said it would allow gyms and swimming pools to open their doors from next week, travel to and from the EU could resume from June 3rd and movie cinemas could reopen from 15th June. Meanwhile, Trump told reporters that he would reopen the US economy “vaccine or not vaccine.” The race to find a vaccine continues apace, with more than 100 vaccines in development globally according to the WSJ. Small US biotech firm Sorrento Therapeutics saw its share price rise almost 200% after it claimed that initial lab results on its experimental antibody were effective against COVID-19. Separately, the BBC reported that the US government’s National Institutes of Health and researchers from the University of Oxford had seen encouraging results from their experimental vaccine on a group of monkeys. US medical advisor Fauci has suggested it will take 12 to 18 months to develop a vaccine. Overnight, Fed Chair Powell told 60 Minutes that a vaccine may be needed for the economy to fully recover from the current shock. 

NZ swap rates fell by up to 4bps on Friday and the curve flattened after the RBNZ announced it would keep its government bond buying at $1.35b for the week ahead, this is a faster pace than New Zealand Debt Management is issuing the bonds. The 10-year swap rate finished the week at 0.6%, near its all-time low. 

Chart of The Day NZDJPY

From a technical and trading perspective, risk markets are recovering this morning as such the NZDJPY bulls are attempting a defence of range support towards 63.00 successfully testing the equality objective at 63.23 and bouncing. On the day a close back through 64.20 would flip the daily chart bullish as per the near term volume weighted average price, as such bullish exposure should be rewarded initially targeting a test of range resistance to 66.00, through here opens a move to test the primary equality objective sighted at 69.57. A daily close sub 63.00 would negate the bullish thesis opening a test of 62.00

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