NZD: NZD/USD - Probes The 0.5850 Area

The NZD/USD had a range today of 0.5603 - 0.5617 in the Asia-Pac session, going into the London open trading around 0.5610, -0.05%. The NZD/USD drifted sideways in a quiet Asian session with Japan out. Crypto has had a good bounce over the weekend indicating we might see a constructive open for risk, I would still be wary considering the price action we had last week. The NZD move lower stalled below 0.5600 and should risk build on this positive open we could potentially see it drift higher. The RBNZ this week will be important as they start to approach neutral, there is a risk the RBNZ is not dovish enough for a short market. I suspect the NZD will need global risk to come under pressure again this week to continue its move lower.

• "NZ Treasury Says Economy Yet to See Broad-based Momentum. New Zealand’s economy has yet to see broad-based momentum across sectors even as economic indicators improve, the Treasury Department says in its Fortnightly Economic Update." via BBG. NSN T67HOOKIUPSV <GO>
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5670(NZD788m Nov 26), 0.5720(NZD646m Nov 25) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 39 Points

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The USD/JPY range today has been 156.33 - 156.80 in the Asia-Pac session, it is currently trading around 156.60, +0.15%. The pair has drifted sideways in a very quiet session with Japan out. The price action looks pretty clear for now though and Japanese officials would have to do something extraordinary to change the narrative. The path of least resistance is now a higher USD/JPY and I suspect any dips back toward the 154-155 area would be used as buying opportunities. I feel they will have to show some sign of fighting this toward or above 160, but given the current inputs this could potentially go a lot higher than that. It will be interesting when we get the CFTC data back as I suspect real money would only just be starting to turn back to a short Yen position.

• MNI AU - Japan More Economically Exposed To China Than Vice Versa : Japan/China tensions, over recent remarks made by Japan PM Takaichi, showed no signs of de-escalating over the weekend. Economically, Japan has more to lose relative to China, in terms of potential loss of export and tourism related flows.
• Options : Close significant option expiries for NY cut, based on DTCC data: 155.00($1.07b),158.00($383m). Upcoming Close Strikes : 153.00($1.17b Nov 26), 154.00{$2.14b Nov 26), 155.00($1.86b Nov 26) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 103 Points

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

NZGB yields have done very little to start the week. The 2yr was last near 2.58%, having around a 1bps range so far today, while the 10yr was at 4.15%, unchanged from end Friday levels and also with a tight range trade for Monday's session. With Japan markets out today, these has been no US Tsy trading (with US Tsy futures little changed). Focus in NZ is firmly on Wednesday's RBNZ decision. A 25bps cut is widely expected, with focus on the outlook and risks of cuts into 2026 (which can't be ruled out in our view). 

• Via BBG, the NZ Treasury noted in its fortnightly economic update: New Zealand’s economy has yet to see broad-based momentum across sectors even as economic indicators improve." 
• The NZ 2yr swap rate (NDSO2) has edged down a touch, but remains above 2.40% at this stage. The NZGB 2/10s curve is little changed at +157bps. 

• The local data calendar is quiet until Wednesday's RBNZ decision.