New Zealand’s Banking Debate vs. NZDJPY (18th March)

Key Developments

• ANZ and BNZ posted record-breaking profits, fueling concerns over banking competition.
• Finance Minister Nicola Willis previously vowed to take action against high bank profits but is now considering rolling back capital requirements.
• The Reserve Bank’s 2019 capital requirement decision is under scrutiny, with some arguing it raises costs for borrowers.
• Critics, including former RBNZ Governor Adrian Orr, argue banks have enough profit margin to offer better deals without reducing financial safeguards.
• Reducing capital requirements could increase financial instability and future bailout risks.

Impact on Financial Markets

• New Zealand Dollar (NZD) Outlook: Banking policy shifts may impact investor confidence in the NZD.
• Interest Rates: If capital requirements are eased, lending rates may decrease, but financial stability concerns could rise.
• Banking Stocks: Increased scrutiny of profitability and regulation may create volatility in bank stocks.

Key Takeaway for Traders

The debate over banking competition versus financial regulation will shape New Zealand’s economic landscape. While lower capital requirements could ease lending conditions, they may also raise risks to long-term financial stability. Traders should monitor government decisions closely for potential market impacts.

NZDJPY – D1 Timeframe

The bearish double break of structure on the daily timeframe chart of NZDJPY forms the initial basis for a bearish sentiment. In addition to the structure, we find that the descending order of the moving averages, the trendline resistance, and the 100-day moving average resistance provide the needed confluences to confirm the bearish outlook. The highlighted zone is the target area of entry.

NZDJPY – H4 Timeframe

On the 4-hour timeframe chart of NZDJPY, we see the supply region more clearly, realizing that it falls within the 88% Fibonacci retracement region and can be trusted to usher in the necessary bearish momentum following a rejection from that zone.

Analyst’s Expectations: 

Direction: Bearish

Target- 84.274

Invalidation- 89.682

CONCLUSION

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