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The latest monetary policy statement from the Reserve Bank of New Zealand is set to hit the wires, making this classic setup on NZD/USD one to watch for the next session or two.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/USD ahead of UK GDP data, so be sure to check that out to see if there is still a potential play!

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 13655.68 +1.20%
FTSE: 7514.74 +0.91%
S&P 500: 3372.24 +0.60%
DJIA: 29388.55 +0.38%
US 10-yr 1.589% +0.042
Bund 10-YR -0.393% +0.018
UK 10-YR: 0.573% +0.015
JPN 10-YR: -0.059% -0.03
Oil: 50.30 +1.47%
Gold: 1573.60 -0.37%
Bitcoin: 10058.21 +2.65%
Etherium: 228.17 +3.38%

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:

  • ECB Lane speech at 5:00 pm GMT
  • BOE Haskel speech at 5:00 pm GMT
  • Fed Quarles speech at 5:15 pm GMT
  • Fed Bullard speech at 6:30 pm GMT
  • Fed Kashkari speech at 7:15 pm GMT
  • Australia Consumer confidence at 11:30 pm GMT
  • Reserve Bank of New Zealand Monetary policy statement at 1:00 am GMT (Feb. 12)

What to Watch: NZD/USD

NZD/USD 1-Hour Forex Chart
NZD/USD 1-Hour Forex Chart

The Reserve Bank of New Zealand will likely give the Kiwi a boost of volatility in the upcoming Asia session with its latest statement on monetary policy. Expectations are for no change this month as recent economic data has been net positive, and as they wait to see the full extent of damage the Coronavirus is set to do to the world economy.

With volatility likely to rise for the Kiwi, we’re checking out NZD/USD as it recently saw strong downside momentum before bounce this week. This is creating a simple Fibonacci retracement setup on the one hour chart above of NZD/USD, a high probability setup for any of you bears out there. If the market makes it up to the Fib area ahead of the meeting, the scenario to watch out for is a more dovish-than-expected RBNZ and reversal pattern back to the downtrend after the event. If so, the potential return-on-risk is very good when shorting around the Fib area, using the daily ATR of around 40 – 50 pips as a stop guide, and targeting the previous swing low and beyond.

For the bulls, any rhetoric lowering the odds of a potential rate cut this year will likely draw in buying support for the Kiwi, at least for the short-term as recent sessions have show global positive risk sentiment as the main driver for financial markets. In this scenario, a break/retest/hold above the 0.6450 handle/Fib area may draw in buyers short-term, especially if we continue to hear positive risk related news (i.e., slowing Coronavirus spreading or more stimulative action from major central banks). A break above that level and targeting the next swing high at the major psychological level still makes for a good potential short-term return-on-risk if using the daily ATR as a stop guide.