Forex Trading Tips for NZD/JPY | Get Started Now

Instrument description

The New Zealand Dollar (NZD) and the Japanese Yen are both included in the list of ten of the most traded global currencies in the Forex market, but their combination makes a minor pair and is denoted by NZD/JPY. The exchange rate of NZD/JPY indicates NZD as the base currency, while JPY is the quote or counter currency.

The NZD/JPY pair is not widely traded in the Forex market but can prove to be a niche pairing to diversify an investment portfolio. The NZD/JPY pair has a low trading volume and quite volatile, which is the reason why this pairing is not a feasible option for novice traders but can be lucrative for a veteran investor.

The exchange rate of the NZD/JPY pair shows how many Yen are required to buy one New Zealand Dollar. For example, if the current rate is 69.28, it means one NZD is equal to 69.28 Yen, or a trader would require 69.28 Yen to purchase 1 NZD.

History of NZD/JPY Currency Pair

The NZD/JPY pair may not be as popular as other major currency pairs, but it offers numerous opportunities for traders in the New Zealand and Japanese Forex markets. The Japanese Yen is regarded as a low yield currency, which makes it an excellent option for performing a carry trade where traders can borrow inexpensively in JPY to purchase high yield currency such as U.S Dollar or even New Zealand Dollar. The profit in carry trade results from the difference in the interest rates.

The New Zealand Dollar, also called a ‘Kiwi,’ replaced the New Zealand Pound in 1967, and for the past two decades, the economy of New Zealand has flourished mainly due to the country’s wide range of agricultural goods. New Zealand’s economy depends on trade relations with Australia, China, U.S.A, and Japan. The country’s free-market policies removed the barriers of foreign investment, and in 2005, New Zealand was named the world’s most business-friendly country.

The exports that make New Zealand popular include dairy products, wood, seafood, and wool. A significant portion of revenue for New Zealand’s government is also generated from tourism as the country is ranked as the most favorite tourist destination for many years.

The Japanese economy suffered and collapsed badly after the end of the Second World War, but the country quickly regained due to its technological prowess and increased value in both the industrial and agricultural sectors. Japanese Yen is now the third most traded currency after the U.S Dollar and Euro. Japan has an extensive industrial and technological base with motor vehicles, electronics, machines, chemicals, and processed foods.

The Japanese Yen is favorite when it comes to performing a carry trade in times when there is global economic stability, but traders usually avoid carry trades when there is a crisis in the market. Japan has an unemployment rate of 4%, which is probably the lowest in the world. The Yen is also used as a reserve currency after the U.S Dollar, Great Britain Pound, and Euro.

The NZD/JPY pair reached an all-time high value of 436.99 in August 1974, while the all-time low for the NZD/JPY pair was 41.70 in October 2000. The trade balance states that New Zealand imports nearly 0.50% of Japan’s exports while Japan imports almost 6.3% of New Zealand’s total exports.

How to Trade NZD/JPY Pair

The performance of the NZD/JPY pair depends on the health and performance of the economy in both New Zealand and Japan. The spreads are wide, but the pair sometimes witnesses increased volatility that provides numerous trading opportunities. The volatile nature of the NZD/JPY pair allows traders and investors to try to take advantage and have the possibility to potentially profitin a short space of time. Among other ways to trade NZD/JPY pair an option is Contract for Differences (CFDs), which is a derivative financial instrument where traders predict the value of the underlying asset rather than buying and owning the currency.

As a trader, you have the option of using leverage to increase your chance of magnifying your profits. But there are also equal chances of significant losses if the prediction is wrong, so you can consider to use risk management tools . With CFDs, you can also trade in both directions, which means going Long or Short when trading positions. If you think that NZD will gain against the JPY, then you would go Long or Buy. Similarly, if you think that NZD will decrease in value as compared to JPY, then you would go Short or Sell.

How to read the Price Change in NZD/JPY Pair

The NZD/JPY pair is said to witness average volatility even though both are ranked in ten of the major currencies that are traded in the forex market. The NZD/JPY pairing see daily price movements that vary within the range of 100 to 200 points, which provides a prospect for short term traders to speculate the price movements and magnify their profits. If the NZD/JPY rate declines, it shows that JPY has gained value against the NZD, and if the NZD/JPY rises, it means that the JPY has depreciated against the NZD.

The NZD/JPY pair is quite a sensitive pair when it comes to reacting to market sentiments and economic news. For trading the NZD/JPY, the trader must take help from technical analysis tools and also examine the fundamental factors to effectively predict the price movements of the NZD/JPY pair. traders should examine support and resistance levels along with the Relative Strength Index (RSI) indicator, which are two of the technical analysis tool to predict the price movement and direction of the market.

The ticker for the New Zealand Dollar exchange with Japanese Yen is denoted by NZD/JPY in the Forex market. If we examine the price chart of the NZD/JPY pair, we see a low value of 63.502 on May 18, 2020. However, there has been an upward trend since then, and the market saw a high value recently of 71.348 on June 5, 2020; currently, the NZD/JPY stands at a value of 69.361. The Bid price is 69.375, while the Asked price is 69.363.

What causes price change in the NZD/JPY pair?

The central banks of New Zealand and Japan play an essential role in stabilizing the economy by taking crucial monetary decisions and releasing timely financial news. The Reserve Bank of New Zealand (RBNZ) and Bank of Japan (BOJ) not only influence the value of NZD and Yen, respectively, but also set the interest rates that impact the exchange rate of the NZD/JPY pair.

The macro-economic factors that influence the NZD/JPY pair are Gross Domestic Product (GDP), interest rates, inflation, employment rate, and relations with trading partners that include U.S.A, Australia, and China. There are certain technical analysis tools that can help traders try to accurately forecast the price movements and try to lower their risk when trading the NZD/JPY pair. The interest rates are a crucial factor when evaluating a currency, and New Zealand and Japan are complete opposites as New Zealand is known for keeping interest rates high while Japan is famous for keeping interest rates considerably low and even negative, once in 2016.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.