"Despite lower US rates, USD/JPY has been broadly range bound while other USD crosses have moved significantly more.

Indeed, USD/JPY has been broadly trapped in a range, which leaves some opportunity for the major to play catch up with rates. Importantly, interest rates remain the main driver of the USD/JPY with equities having fallen by the wayside.

Japanese labour and inflation data are unlikely to be significant drivers of the USD/JPY given that the BoJ has committed to locking in the steepness of the JGB yield curve. Inflation will likely remain weak on the back of the strong JPY.

Potentially more important drivers are the 2Y and 20Y JGB auctions as the market continues to test the BoJ's Yield Curve Control.

The rally in the NZD/USD on the back of the NZ CPI upside surprise has likely cleared out near-term short positions, so positioning will likely be less of a factor going forward.

There is little on the domestic front to drive the NZD next week. NZ's trade balance should improve from a 3-year low on the back of stronger commodity prices, but the main driver of the NZD next week will be sympathetic moves with the AUD on the back of Australian CPI data as well as shifts in expectations for FOMC rate hikes".

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