1. What drives the pair?
One of the important fundamental factors driving the pair is safe haven versus yield search. We must remember though, that New Zealand is not a high risk country! This is why we can see NZDJPY going up sometimes in spite of JPY currency index going up too. Both countries are 'far' from the rest of the world and both are 'isolated' as they are 100% insular. Although initial reactions to events like Brexit make JPY or CHF appreciate against everything, after the first moments NZD and similar currencies also go up, as they give better yield while not being affected that much by general pains of economy and politics.
Let's see relevant data for both countries when it comes to trading the pair:
NZDJPY is basically trading food versus hi-tech. Both countries are well developed, though Japan is definitely the peak of developed economy (yet still growing). The pair is good to trade for 'lazy' traders as it is almost immune to most of EU and much of the US data. The only simpler model that comes to my mind would be AUDNZD. Still, apart from Asian and Australian/NewZealand data, many important events in the rest of the world will have only slight or no influence on this pair. Negative events connected with food across the world will strenghten NZD, other negative events will strenghten JPY or both JPY and NZD. Pair is driven mainly by technicals, yield search, and the condition of each of the countries' economies.
2. Incredibly strong swings and trends.
As the lines drawn on the chart show, the pair tends to have a very persistent market sentiment and trends here could be even longer than a full year. This is not only for swing trading, but also with NZD interest rate of 2% right now being in its historical low, this pair makes a great carry trade opportunity. Also, noticeably, general trend is up over here - we can interpret downward movement on the weekly chart from 2015 as a correctional one for the general NZD appreciaton versus JPY.
The range of movements in this pair historically is between about 55 and 94. So anyone who had managed to keep the position and had had enough stomach to buy on historical low or sell at historical highs was able to actually almost double their deposit with single trades even without being leveraged! That proves the point that NZDJPY makes really rare market opportunities.
3. Scalping is also an option.
For anyone who does scalping, a short look at the 1M chart proves that even as the market spread is not the tightest one, the pair still makes very fast and strong movements that tend to persist for even longer than some typical scalping time frames. A method that proved quite successful for me was going with the main long term trend, exiting when movement decreases momentum and just looking for another moment to go with the main sentiment.
Here is some example from my own live account and how I made some pip using 5M chart (shown on 30M to make it clear enough to see for everybody):
We can see easily, that even with entry and exit points being far from perfect, still I have made quite a pip.
4. Spread versus ATR
Usual market spread on NZDJPY exceeds 1-2pips (except the best liquidity hours when it still gets close to 1). Generally that would not be a good argument for trading the pair a lot. Yet when we look up the ATR together with ADX for this one, we can plainly see, that all we have to do is get on the right side of the market and we can literally get rich quick.
Not only we do have times of the True range being huge here, we also get it highly correlated with ADX! Due to that meaning strong and very rapid movement to one side and the spread being not the smalles one here - I'd advise checking fundamentals before trading this one and being careful with leveraging oneself. The currency pair is not for full leverage scalpers - yet any rational leverage here will give a beautiful outcome. Except consolidation periods, the market spread will easily be neutralized by the scale of the price movements.
Summary
This currency pair, being one of those I started my trading venture with, is actually one of the best for beginners. Some extra study is needed before starting trading it, yet it is not a very tricky or unpredictable pair.
NZDJPY proves to be a dependable carry as well as being suitable for scalping. For more experienced traders, it is worth to have a deeper insight of this one, as many strategies will work out well here - we can even base our trading just on this single pair!
One of the important fundamental factors driving the pair is safe haven versus yield search. We must remember though, that New Zealand is not a high risk country! This is why we can see NZDJPY going up sometimes in spite of JPY currency index going up too. Both countries are 'far' from the rest of the world and both are 'isolated' as they are 100% insular. Although initial reactions to events like Brexit make JPY or CHF appreciate against everything, after the first moments NZD and similar currencies also go up, as they give better yield while not being affected that much by general pains of economy and politics.
Let's see relevant data for both countries when it comes to trading the pair:
- New Zealand
- Politics: Constitutional monarchy with parliamentary democracy. Constitution is not codified. British monarch is the head of state.
- Climate: mild and temperate maritime. Great for any farming activities. Due to isolation of islands, own biodiversity evolved, making the place interesting as a tourism location as the remaining native wild species are protected and attempts to restore the islands ecologically are being made.
- Economy: high-income advanced economy. Main focus on food commodities: sealing, whaling, dairy products, agriculture. New Zealand also has its own production of timber, wool, kauri gum, some coal and natural gas has been alos reported to be found there. Average of 24% of the agricultural output is exported. Also wood contributes to a few percent of coutry's export value. Another noticeable and increasing role in the country's economy is being played by tourism. Well maintained natural environment attracts not only visitors, but also makes the islands a great spot for movie scenes, like 'The Lord of the Rings'. Rest of important exports are wool, meat and fish. Main imports are oil, electronics, cars, machines.
- Trade: Main trade partners of New Zealand are Australia, Japan, Great Britain, USA, China.
- Curiosity: New Zealand is the least corrupted country across the whole world according to the ranking from 2008
- Japan
- Politics: Constitutional monarchy, very limited power of the emperor (rather a representative role). Three levels of court, Prime Minister and National Diet are the main decisive offices, we have standard separation of powers.
- Climate: temperate, varies across the regions. Japan is prone to natural disasters due to the geographical localisation - hurricanes, storms, earthquakes etc.
- Economy: highest rank of economic freedom and competitiveness. Also the highest developed country. Exports: hi-tech, cars, electronics, machine tools, steel, metals, chemicals, textiles, processed foods. Imports: machinery and equipment, fossil fuels, food, raw materials. Almost all the production is based on industries and manufacturing.
- Trade: Main partners are: USA, China, South Korea, Taiwan, Hong Kong, Saudi Arabia, United Arab Emirates, Australia and New Zealand, Indonesia.
- Curiosity: Although farming and agriculture is 1,2% of their economy, the densly populated country is self-sufficient when it comes to food. Japanese constructions are a real masterpiece - they survive most of the natural disasters, including earthquakes.
NZDJPY is basically trading food versus hi-tech. Both countries are well developed, though Japan is definitely the peak of developed economy (yet still growing). The pair is good to trade for 'lazy' traders as it is almost immune to most of EU and much of the US data. The only simpler model that comes to my mind would be AUDNZD. Still, apart from Asian and Australian/NewZealand data, many important events in the rest of the world will have only slight or no influence on this pair. Negative events connected with food across the world will strenghten NZD, other negative events will strenghten JPY or both JPY and NZD. Pair is driven mainly by technicals, yield search, and the condition of each of the countries' economies.
2. Incredibly strong swings and trends.
As the lines drawn on the chart show, the pair tends to have a very persistent market sentiment and trends here could be even longer than a full year. This is not only for swing trading, but also with NZD interest rate of 2% right now being in its historical low, this pair makes a great carry trade opportunity. Also, noticeably, general trend is up over here - we can interpret downward movement on the weekly chart from 2015 as a correctional one for the general NZD appreciaton versus JPY.
The range of movements in this pair historically is between about 55 and 94. So anyone who had managed to keep the position and had had enough stomach to buy on historical low or sell at historical highs was able to actually almost double their deposit with single trades even without being leveraged! That proves the point that NZDJPY makes really rare market opportunities.
3. Scalping is also an option.
For anyone who does scalping, a short look at the 1M chart proves that even as the market spread is not the tightest one, the pair still makes very fast and strong movements that tend to persist for even longer than some typical scalping time frames. A method that proved quite successful for me was going with the main long term trend, exiting when movement decreases momentum and just looking for another moment to go with the main sentiment.
Here is some example from my own live account and how I made some pip using 5M chart (shown on 30M to make it clear enough to see for everybody):
We can see easily, that even with entry and exit points being far from perfect, still I have made quite a pip.4. Spread versus ATR
Usual market spread on NZDJPY exceeds 1-2pips (except the best liquidity hours when it still gets close to 1). Generally that would not be a good argument for trading the pair a lot. Yet when we look up the ATR together with ADX for this one, we can plainly see, that all we have to do is get on the right side of the market and we can literally get rich quick.
Not only we do have times of the True range being huge here, we also get it highly correlated with ADX! Due to that meaning strong and very rapid movement to one side and the spread being not the smalles one here - I'd advise checking fundamentals before trading this one and being careful with leveraging oneself. The currency pair is not for full leverage scalpers - yet any rational leverage here will give a beautiful outcome. Except consolidation periods, the market spread will easily be neutralized by the scale of the price movements.
Summary
This currency pair, being one of those I started my trading venture with, is actually one of the best for beginners. Some extra study is needed before starting trading it, yet it is not a very tricky or unpredictable pair.
NZDJPY proves to be a dependable carry as well as being suitable for scalping. For more experienced traders, it is worth to have a deeper insight of this one, as many strategies will work out well here - we can even base our trading just on this single pair!