🇳🇿 NZD — Weak Bullish

The main driver remains the external backdrop, with softer US rate expectations and improved risk sentiment providing support, while the RBNZ’s comparatively supportive policy stance continues to give NZD some relative rate backing. The labour-market report was mixed rather than decisively negative, as higher unemployment was offset by stronger-than-expected employment growth.

The main constraint is that domestic momentum may be starting to soften, while NZD remains sensitive to China, commodities and broader risk appetite. The recent recovery therefore does not yet establish a stronger trend, particularly given the Kiwi’s relative underperformance versus AUD.

The stance remains weak bullish as the policy backdrop and external conditions still lean constructive, but Thursday’s data will be important in determining whether the softer labour signal develops into a broader domestic deterioration.

🇯🇵 JPY — Weak Bearish

The main driver remains the wide US-Japan yield differential, with elevated foreign yields continuing to support Yen-funded carry demand. Official intervention can slow the pace of depreciation and the recent decline in US yields provides some relief, but neither has yet changed the underlying policy imbalance.

The sharp reversal after the initial intervention-driven rally highlights the currency’s vulnerability when US yields recover. For JPY to establish a more durable recovery, markets would need clearer evidence of a shift in Japanese policy or a sustained narrowing of the relative yield gap. Global risk sentiment remains important through its impact on carry demand and foreign yields.

The stance remains weak bearish as intervention limits the downside in the near term, but the fundamental rate backdrop continues to favour renewed weakness.

First target 94.000 - Second target 94.800

Risks to trade:

Monday: BoJ Summary of Opinions — A more hawkish policy assessment would support JPY by strengthening expectations for further tightening, while a cautious tone would reinforce the existing rate disadvantage.

Thursday: PPI — Firmer producer prices could strengthen expectations for persistent inflation and support JPY, while softer data would reduce the case for tighter BoJ policy.

Thursday: Inflation Expectations, Manufacturing PMI — Firmer inflation expectations or stronger manufacturing activity would support the RBNZ outlook and NZD, while softer readings would increase pressure on the bullish bias.

UPDATE: 17th August 26'

NZD/JPY hit first target at 94.000. Still holding long position with SL at BE. Current market environment where USD is weaker due to domestic backdrop and stagnant situation regarding US/Iran war...gives some space for risk-on sentiment benefiting cyclical currencies.

Last weeks soft NZ Inflation expectations print did not help the NZD, however the external backdrop and relative rate differentials as stated above supports NZD/JPY going forward - all things being equal.



UPDATE: 19th August, 26'

CLOSED: +0.5%