JPY/NZD Weekly Fundamental Forecast: RBNZ Hike May do Little for NZD

JPY

Divergence is increasing on Yen future prices and market positioning. Yen is at it’s 24-year low, net-short exposure is at its least bearish level since March 2021. Over 27k gross shorts were closed over the past two weeks, with 8.5k gross longs added to it. Gross longs are also at their most bullish level since the pandemic. And this suggests that traders do not believe the Bank OF Japan will retain their ultra-easy monetary policy for as long as the central bank suggests. But it also means that prices could be too low relative to market positioning, or market positioning has jumped the gun and may need to reserve course. As divergences between prices and market positioning rarely last for too long.

NZD

NZD futures are on the cusp of flipping to net-long exposure for the first time since April. Admittedly it was only net-long for a single week but it does at least show the appetite to be short in almost non-existent, with net short exposure sitting at -276 contracts. Whilst gross shorts have remained around the 16-22k level these past few weeks, gross shorts are climbing slowly to show initiative buying from large speculators. The Reserve Bank of New Zealand are expected to raise rates by 50-bp on Wednesday, so the key focus will be on their OCR projections which were upwardly revised from 3.5% to 3.9% by mid 2023. Given house prices are falling and growth concerns linger, perhaps we’ll see a dovish hike.