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NZD/USD is on the move as traders get ready for the interest rate statement coming soon from the Reserve Bank of New Zealand. What areas and scenarios should we watch out for potential short-term opportunities?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/USD ahead of flash PMI 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: 12517.00 +2.07%
FTSE: 6313.75 +1.11%
S&P 500: 3145.72 +0.89%
DJIA: 26230.64 +0.79%
US 10-yr 0.715% +0.011
Bund 10-YR -0.409% +0.029
UK 10-YR: 0.211% +0.011
JPN 10-YR: 0.005% -0.003
Oil: 40.46 0.00%
Gold: 1783.90 +0.99%
Bitcoin:9663.21 -0.21%
Ethereum: 243.56 +0.074

Fresh Market Headlines & Economic Data:

Nasdaq hits record high, Dow jumps 100 points after overnight China trade deal scare

Flash U.S. Manufacturing PMI at 49.6 in June vs. 39.8 in May

Richmond Manufacturing Index rose from -27 in May to 0 in June

Flash Eurozone Manufacturing PMI at 46.9 vs. 39.4 in May

Flash Germany Manufacturing PMI at 44.6 vs. 36.6 in May

Flash France Manufacturing PMI at 52.1 in June vs. 40.6 in May

Flash U.K. Manufacturing PMI at 50.1 in June vs. 40.7 in May

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

API Crude Oil stock change at 8:30 pm GMT
Bank of Japan Summary of Opinions & Services PPI at 11:50 pm GMT
Reserve Bank of New Zealand Rate Statement at 2:00 am GMT (June 24)
Japan Leading Economic Index at 5:00 am GMT (June 24)

What to Watch: NZD/USD

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

Lots of action in NZD/USD this week and we may see even more within the next session as the latest interest rate decision from the Reserve Bank of New Zealand is set to release in the upcoming session (June 24, 2:00 am GMT).

Expectations are for the RBNZ to keep policies unchanged, which seems to have been a positive for the New Zealand dollar based on its rally this week against the majors. That’s very true for NZD/USD that has done nothing but go up since the new week open, up over +2.00% since the Monday Asia open.

On the chart above, we can see that rally taking the market above the falling ‘highs’ pattern, which is a signal of a potential new leg higher, especially after the small pullback and support at the falling trendline. So, the odds are currently in NZD/USD bulls favor, but what further opportunities could be ahead?

First, keep in mind that the daily ATR is roughly around 80 – 90 pips, and given that this is a top tier event, the odds are pretty good we’ll see NZD/USD move in that full range. Second, let’s remember that the RBNZ can surprise traders from time-to-time, like at the last meeting where they unexpectedly left negative rates on the table. So, it’s probably best to wait for the event before putting orders / live trades up.

With those things in mind, it’s probably best to wait for the event and assess the outcome before putting orders / trades in. With this mindset, you’ll avoid the uncertainty risk and you’ll likely still be able to catch a good chunk of that likely daily ATR move.

For the bulls, watch out for any positive surprises (i.e., reducing/ending bond buying program, taking negative rates off the table) before considering a long position. Also considering whether not broad risk sentiment is still on at the time. If these scenarios play out and we don’t see a “sell on the news” reaction, consider a small long position from current levels down to today’s Asia session lows (around 0.6450)

For the bears, negative commentary from the RBNZ (i.e. more stimulus, still open to negative rates) will likely take the Kiwi down right away given the current expectations. In that scenario, consider a short entry from current levels up to the swing highs (around 0.6575). And if broad risk sentiment is still positive, make sure to keep the position size small since the current trend is up. You can always increase size as the trade goes your way.