The NZD/JPY currency pair rebounded sharply on Wednesday, climbing around 80-85 pips from a one-week low before touching a daily high near 87.00. However, the pair struggled to maintain momentum and was last seen hovering around 86.80, up 0.20% for the session.
RBNZ’s Rate Cut Weighs on NZD, but Policy Signals Support Recovery
The New Zealand Dollar (NZD) initially weakened after the Reserve Bank of New Zealand (RBNZ) delivered a widely expected interest rate cut at its February policy meeting. However, losses were short-lived as RBNZ Governor Adrian Orr indicated that the end of the easing cycle was in sight and that future cuts would likely be smaller, at 25 basis points in April and May. This guidance triggered a wave of short-covering in the NZD/JPY cross.
Equity Market Strength Pressures JPY, but BoJ Rate Hike Bets Limit NZD Upside
A generally positive tone in global equity markets reduced demand for the safe-haven Japanese Yen (JPY), providing additional support to NZD/JPY. However, growing expectations that the Bank of Japan (BoJ) will continue its monetary policy tightening this year have prevented the Yen from weakening significantly.
The BoJ’s hawkish stance, along with rising Japanese bond yields, has limited NZD/JPY’s upside, suggesting the pair may face resistance near its recent highs.
Technical Outlook: Watch for Follow-Through Buying Above 87.00
Despite the intraday recovery, NZD/JPY remains capped below 87.00, with further upside dependent on strong follow-through buying. A sustained move above this level could confirm a bottom near 85.20 (six-month low) and pave the way for further gains.
Conversely, if the pair fails to hold above 86.80, renewed selling pressure could push prices back toward 85.20, marking another test of key support levels. Traders will closely watch RBNZ and BoJ policy developments for fresh directional cues.
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