For many years, New Zealand’s economy has been linked to the UK by exclusive trade agreements. However, when Britain joined the common European market in the 1970s, New Zealand had to look for other outlets for its goods.
New Zealand has many resources. Agriculture is still a large part of the economy, which includes forestry and fishing. New Zealand’s topography allows for a large share of hydroelectric power generation, so It is less likely to tap into global energy markets. Most of the trade now goes to Australia, and it is a neighbor and Asia.
Japan is a relatively small country, markedly different in its Outlook and approach. It has made notable progress in its exports, as demonstrated by the automotive industry and technologies such as electronic consumer goods. It does not possess New Zealand’s natural resources and, consequently, its economy thrives on importing raw materials and increasing its value through production.
Japan has had some setbacks recently, including the 2011 tsunami and subsequent disaster at the nuclear power plant, which, although out of the headlines, still affects the economy. Today, Japan has become the third-largest economy in the world, surpassing China.
These are the basic facts of two changing economies that have developed differently. This gives us some clues as to how to use the different factors affecting the currencies in the pair. For example, in New Zealand, which has a large number of natural resources, when commodity prices rise, growth will lean in favor of NZD rather than Japan’s JPY, which imports most of its goods. Since Japan creates a lot of consumer goods, whenever the world economy gains momentum, Japan necessarily sells its share and therefore becomes more valuable.
When a trader bets on NZD/JPY, he should be aware of the daily changes. They cannot be foreseen based on the basic principles that give the General trends of economic development in the world. Then you need to apply technical analysis to the charts, using any indicators that are most suitable for this currency pair, to calculate the time of your spreads.
Analyzing the weekly chart of the New Zealand dollar against the Japanese one can see the volatility of this pair. This is something that allows for good profits if there is a good spread trading plan and can limit losses. Bollinger bands provide the upper and lower price limits. If they narrow, which often portends a breakthrough in one direction or another, and the trader believes that the New Zealand dollar will strengthen against the yen, he can make a long bet. So, if the prices for the spread-rates increase-the trader wins, if instead of raising, the price went down, you could close it to limit your losses.