Daily U.S. Session Watchlist: AUD/NZD

Kiwi volatility is likely to start kicking in the next session with the latest Reserve Bank of New Zealand monetary policy decision ahead, and AUD/NZD great pair to watch with both bullish & bearish short-term opportunities in the works.

Intermarket Snapshot

Fresh Market Headlines & Economic Data:

• U.S. house prices rise in June, but momentum slowing
• Fed’s Bullard says the end of an era of free trade is imperiling the U.S. economy
• The Richmond Fed composite index dropped from 1 in August to −9 in September
• Oil prices fall due to weak economic data, Saudi output recovery
• German downturn ‘taking a breather’ but recession still looms: Ifo
• After whirlwind of talks, Japan says trade deal with U.S. is agreed
• China’s central bank says in no rush to ease aggressively
• Michel Barnier: ‘No reason’ for optimism in Brexit talks
• MPs to return immediately in wake of supreme court ruling
• U.K. Borrowing (public sector net borrowing excluding public sector banks, PSNB ex) in August 2019 was £6.4 billion
• U.K. Manufacturing output steady while orders slump
• Australia central bank governor leaves door open for more rate cuts
• Jibun Bank Flash manufacturing PMI: 48.9 in Sept. vs. 49.3 Aug. Final
• BOJ’s Kuroda Expounds on Virtues of Negative Rates
• BOJ Kuroda says any easing will aim to push down short, medium-term rates

Upcoming Potential Catalysts on the Forex Calendar:

• New Zealand Trade balance at 11:45 pm GMT
• Japan Monetary policy meeting minutes at 12:50 am GMT (Sept. 25)
• Reserve Bank of New Zealand monetary policy decision at 3:00 am GMT (Sept. 25)
• Bank of Japan Core CPI at 6:00 am GMT (Sept. 25)
• French Consumer confidence at 7:45 am GMT (Sept. 25)

What to Watch: AUD/NZD

AUD/NZD 1-Hour Forex Chart

What could be the top FX event of the week is just right around the corner, in the form of the Reserve Bank of New Zealand’s latest interest rate and monetary policy decision/outlook. After cutting rates more than expected last month, expectations for the upcoming decision are for no changes to policy. But as we saw last month, expectations aren’t always realized and if we do get a surprise, the volatility could be a great opportunity.

We’re looking at AUD/NZD for this event, not only on the potential for the Kiwi to get moving, but the Aussie always has the potential to see its own volatility spikes due to its tendency to quickly react to U.S.-China trade developments. We also see short-term price action setups for both the bulls and the bears, making it a perfect pair to be reactionary to upcoming events.

If you’re a bull on AUD/NZD, a rate cut/hold, further dovishness from the RBNZ on global demand and trade uncertainty, and/or hints of further cuts could be the catalyst for an NZD selloff. The pair is already testing a minor support level around 1.0750, but in this scenario, it would be prudent to scale in small positions all the way down to 1.0700 if you’re aggressive. If you’re more conservative, waiting for a retest of 1.0700 is something to consider.

If you’re a bear on AUD/NZD, then hints that the RBNZ will continue to hold off on any further rate cuts and/or any hawkish rhetoric on global demand and trade could keep the recent run higher in Kiwi going. More aggressive traders may consider shorting anywhere below 1.0750 as a valid trade entry strategy, but for the more conservative traders/those looking for better potential return-on-risk, a retest of the broken rising trendline/ 1.0800 handle is something to consider as well.