With a big time catalyst coming up for the New Zealand dollar, the tightening market in NZD/USD is one to watch for a breakout play.
Intermarket Snapshot
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US 10-yr 2.435% +0.017 Bund 10-YR -0.022% +0.002 UK 10-YR: 1.011% +0.025 JPN 10-YR: -0.071% +0.019 |
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Fresh Market Headlines & Economic data:
- Theresa May’s future in doubt as UK lawmakers seize control of Brexit process
- Fed should consider holding more short-term bonds: Rosengren
- US housing starts fall in February on weak single-family homebuilding
- Home price gains slow to a 6 1/2-year low, Case-Shiller says
- German consumer sentiment to face setback: GfK
- Bank of Japan core CPI 0.4% vs. 0.5% previous
- Global strain stirs BOJ debate of more easing in March
- Big improvement to New Zealand trade balance; +12M vs. previous -950M
Upcoming Potential Catalysts on the Forex Calendar:
- RBA’s Kent speaks in Sydney at 11:00 pm GMT
- RBNZ Monetary Policy Statement at 1:00 am GMT (Mar. 27)
- ECB Mario Draghi speaks in Frankfurt at 8:00 am GMT (Mar. 27)
What to Watch: NZD/USD
As mentioned up top, we’ve got a top tier catalyst for the Kiwi in the form of the Reserve Bank of New Zealand’s latest monetary policy statement. At the last monetary policy meeting and statement in February, the RBNZ surprised traders by keeping their rhetoric pretty optimistic, despite signs of a global growth slowdown, especially in the Asia region. Could we see the same positive rhetoric once again? No one knows of course. We do know that GDP could be a concern for the RBNZ as the growth rate has been trending lower, but there have been positive signs since the last meeting, improving retail sales, trade balance, and manufacturing sentiment, which could lead to an optimistic outlook once again.
With the odds of the RBNZ leaning one way or the other probably still sitting at neutral, it might be best to wait for the event and for a confirmation in price before picking a direction. NZD/USD seems to be the best pair to watch for this type of scenario as it starts to consolidated into a symmetrical triangle around the 0.6900. For the bulls, a break above the descending highs on positive RBNZ rhetoric (no rate cuts for now) should be considered for a long play, while the bears should be on the look out for potential rate cut rhetoric and downside break of the triangle.
And for those who are bold enough to put orders up before hand, a straddle setup is something to consider if you’re confident the move will have momentum right away and/or you can’t watch the event live to put in market orders.