NZD/JPY: Still structurally bearish – ANZ

Analysts at ANZ point out that the NZD/JPY has remained in a downward trend channel for the past 12 or so months, recently hitting over a two year lower earlier in August.

Key Quotes

“One of our strongest views is that NZD/JPY will continue to head lower over the coming 12 to 24 months as we enter a tighter period for global liquidity.”

“The JPY is one of the most undervalued currencies on our BEER framework, so there is certainly ‘room’ for the JPY to rally.” 

“However, most importantly, we find that just as the NZD (and AUD) struggles in periods where global liquidity is tightening (which is something that is fast approaching), the JPY outperforms strongly. In many ways this is unsurprising given the yen is one of the key ‘funding’ currencies.” 

“That leaves us structurally bearish NZD/JPY. That said, swings in risk sentiment will still matter, and should drive plenty of volatility in this cross.”