NZD/CAD has potential for big moves this week with TWO central bank statements coming soon for both currencies.
With the Bank of Canada and Reserve Bank of New Zealand spark a break in the pair’s tight range?
NZD/CAD Volatility Spike Ahead?
Volatility in NZD/CAD has calmed down over the past two months, sticking to a range roughly between 0.8630 – 0.8750.
Not only is this likely the product of a relatively quiet summer in terms of major news catalysts, but also likely a function of rising speculation that we could potentially see monetary policy tightening sooner-than-expected from both the Bank of Canada and the Reserve Bank of New Zealand as inflation rises and the pandemic recovery progresses positively in both Canada and New Zealand.
And speaking of the two central banks, they’re both giving their latest monetary policy statements this week, which could be a recipe for big volatility coming for NZD/CAD depending on their statements.
Expectations are that neither central bank will make changes to policy, but we could see hawkish rhetoric (i.e., hints at earlier tapering measures or pushing forward rate hike expectations).
This scenario would likely result in some volatility but no likely strong directional moves before the end of the week.
A lower probability scenario that may occur is that the BOC reduces quantitative easing measures further, which could draw in a reaction to the Canadian dollar, and in that situation, we’ll be on the lookout for a break below the major support area around 0.8630 before considering a short position to play the longer-term trend lower.
Of course, any big surprises (i.e., an actual surprise rate hike) would spark massive volatility for the respective currency, in which we’d watch for a break of the tight range on NZD/CAD for both a potential short-term and longer-term position play.
What do you all think? Is NZD/CAD a buy? Will the BOC and/or the RBNZ surprise traders this week? More rangebound behavior ahead or will we see the start of a fresh momentum move? Let me know in the comments section below!
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.