Forex Market: NZD/JPY trading forecast for October 5th

Friday’s trade saw NZD/JPY within the range of 76.12-77.64. The pair closed at 77.28, surging 0.70% on a daily basis, while marking the fourth consecutive trading day of gains. The daily high has been the highest level since September 9th, when the cross registered a high of 77.96. In weekly terms, NZD/JPY added 0.36%, while marking a fourth straight week of gains.

No relevant macroeconomic reports and other events, which may influence NZD/JPY trading, are scheduled for Monday (October 5th).

Correlation with Major Pairs

Taking into account the week ended on October 4th and the daily closing levels of the currency pairs involved, we come to the following conclusions in regard to the strength of relationship:

NZD/JPY to NZD/USD (0.9962, or very strong)
NZD/JPY to AUD/USD (0.9912, or very strong)
NZD/JPY to USD/JPY (0.4532, or moderate)
NZD/JPY to GBP/USD (0.0298, or very weak)
NZD/JPY to USD/CHF (-0.0373, or very weak)
NZD/JPY to EUR/USD (-0.6845, or strong)
NZD/JPY to USD/CAD (-0.9781, or very strong)

1. During the examined period NZD/JPY moved almost equally in one and the same direction with NZD/USD and AUD/USD. The correlation between NZD/JPY and NZD/USD, as well as between NZD/JPY and AUD/USD was almost perfect.

2. NZD/JPY moved almost equally in the opposite direction compared to USD/CAD during the past week.

3. NZD/JPY moved strongly in the opposite direction compared to EUR/USD during the week.

4. NZD/JPY moved almost independently in comparison with GBP/USD and USD/CHF during the period in question.

Bond Yield Spread

The yield on New Zealands 2-year government bonds went as high as 2.535% on October 2nd, or matching the high from a day ago, after which it slid to 2.525% at the close to gain 1 basis point (0.01 percentage point) on a daily basis, while marking a third consecutive trading day of increase.

The yield on Japan’s 2-year government bonds climbed as high as 0.019% on October 2nd, after which it fell to 0.010% at the close to lose 0.009 percentage point for the day, while marking the third consecutive trading day of decrease.

The spread between 2-year New Zealand and 2-year Japanese bond yields, which reflects the flow of funds in a short term, widened to 2.515% on October 2nd from 2.496% during the prior day. The October 2nd yield spread has been the most notable one since September 9th, when the difference was 2.579%.

Meanwhile, the yield on New Zealands 10-year government bonds soared as high as 3.350% on October 2nd, or the highest level since September 28th (3.355%), after which it slid to 3.340% at the close to appreciate 2 basis points (0.02 percentage point) compared to October 1st, while marking a third straight trading day of increase.

The yield on Japan’s 10-year government bonds climbed as high as 0.349% on October 2nd, or matching the high from a day ago, after which it slipped to 0.324% at the close to lose 2.5 basis points (0.025 percentage point) on a daily basis. It has been a second drop in the past five trading days.

The spread between 10-year New Zealand and 10-year Japanese bond yields expanded to 3.016% on October 2nd from 2.971% during the prior day. The October 2nd yield difference has been the largest one since September 25th, when the spread was 3.017%.

Daily and Weekly Pivot Levels

By employing the traditional calculation method, the Monday pivot levels for NZD/JPY are presented as follows:

Central Pivot Point – 77.01
R1 – 77.91
R2 – 78.53
R3 – 79.43

S1 – 76.39
S2 – 75.49
S3 – 74.87

By using the traditional method of calculation again, the weekly pivot levels for NZD/JPY are presented as follows:

Central Pivot Point – 76.69
R1 – 78.23
R2 – 79.18
R3 – 80.72

S1 – 75.74
S2 – 74.20
S3 – 73.25