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Trading the News: RBNZ Interest Rate Decision

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by , 06-08-2016 at 07:31 PM (1145 Views)
      
   
Trading the News: Reserve Bank of New Zealand (RBNZ) Interest Rate Decision

According to a Bloomberg News survey, 10 of the 17 economists polled anticipate the Reserve Bank of New Zealand (RBNZ) to retain its current policy in June, but more of the same from Governor Graeme Wheeler and Co. may encourage a further recovery in NZD/USD should the central bank largely endorse a wait-and-see approach for monetary policy.

What’s Expected:

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Why Is This Event Important:

Even though the RBNZ keeps the door open to further support the real economy, a less-dovish policy statement may boost the appeal of the New Zealand dollar as market participants scale back speculation for lower borrowing-costs.

How To TradeThis Event Risk

Bullish NZD Trade: Governor Wheeler Pledges to Ease Policy Further

  • Need green, five-minute candle following the rate decision to consider a long NZD/USD position.
  • If market reaction favors a bullish kiwi trade, buy NZD/USD with two separate position.
  • Set stop at the near-by swing low/reasonable distance from cost; at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is met, set reasonable limit.

Bearish NZD Trade: RBNZ Adopts More Balanced Tone

  • Need red, five-minute candle to favor a short NZD/USD trade.
  • Implement same strategy as the bullish New Zealand dollar trade, just in reverse.

Potential Price Targets For The Release
NZD/USD Daily

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  • NZD/USD appears to have carved a higher-low at the end of May as the Relative Strength Index (RSI) breaks out of the bearish formation from April, with the pair at risk of making another run at the April high (0.7053) should the RBNZ soften its dovish outlook for monetary policy.
  • Interim Resistance: 0.7050 (78.6% retracement) to 0.7070 (23.6% expansion)
  • Interim Support: 0.6570 (100% expansion) to 0.6590 (38.2% retracement)


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