NZD/USD could be setting up for a swing move within a range, but we’ve gotta see if the RBNZ has anything up their sleeve in their upcoming monetary policy statement. Will they signal tightening ahead or will it be a non-event?
Range Play on NZD/USD?
The Kiwi may be seeing fireworks within the next session as we’ll get the latest monetary policy decision from the Reserve Bank of New Zealand in the upcoming Asia session (May 26, 2:00 am GMT).
Expectations are for the RBNZ to hold their short-term interest rate at 0.25%, so the catalyst to watch is for any change in sentiment on their asset purchasing program on whether or not we’ll see any kind of moves to reduce their support.
If we see the scenario where they are not thinking about tightening up monetary policy, then the current retest of the top of the range on NZD/USD (between 0.7100 – 0.7300) may be a setup to consider for a bearish position.
Given the average daily range of around 70 pips, this could spark a short-term bear move back to the bottom of the range, where support has strongly held between 0.7125 – 0.7150.
If we do get hints that the RBNZ may consider reducing their asset purchasing program, or even the possibility of a rate hike, then it’s likely the Kiwi would spike higher as a result.
Watch out for a break above the range on this scenario and for a sustain hold above the 0.7300 handle before considering a long position.
And while it’s highly unlikely we’ll see the bottom of the range retest before or after this event, if it does and the RBNZ comes off as optimistic on their economic outlook, watch out for a buying opportunity in the form of bullish reversal candles between 0.7100 – 0.7150.
What do you guys think? Will volatility pick up in NZD/USD? Will the range hold or will there be a catalyst for a fresh breakout move?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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