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Volatility Isn't Over Yet - NZD/USD Braces for RBNZ Rate Cut

Volatility Isn't Over Yet - NZD/USD Braces for RBNZ Rate Cut

2016-11-09 17:47:00
Michael Boutros, Strategist
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Talking Points

  • NZD/USD at near-term support heading into RBNZ rate decision
  • Immediate risk is lower sub-7380
  • Updated targets & invalidation levels

NZD/USD 120min

NZD/USD 120min Chart

Chart Created Using TradingView

Technical Outlook: Kiwi reversed off confluence resistance last night at 7389- a region defined by the 78.6% retracement of the September decline and the median-line extending off the October low. Heading into the Reserve Bank of New Zealand (RBNZ) interest rate decision, the near-term risk remains for a deeper correction off this mark with a break below 7262 shifting the focus towards subsequent support targets at 7219 & confluence support into 7175- both areas of interest for near-term exhaustion / long-entries.

Keep in mind the central bank is widely expected to cut interest rates by 25 basis points to a record 1.75%. From a trading standpoint, heading into the release I would be looking to fade strength while below the median-line with interim resistance now eye at 7340/46. A breach of the highs invalidates the ‘pull-back’ play with such a scenario targeting the 2016 high-day close at 7450 & 7480/82. Click here for a preview of the RBNZ rate decision.

NZD/USD SSI
  • A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net long NZDUSD- the ratio stands at -2.12 (32% of traders are long)- bullish reading
  • Long positions are 17.2% below levels seen last week while short positions are 10.5% lower over the same time period.
  • Open interest is 19.4% lower than yesterday and 17.0% below its monthly average.
  • The recent drop-off in open positioning weakens the strength of the bullish SSI reading and heading into the release, the risk remains for a deeper pullback before mounting a more meaningful counter-offensive

Relevant Data Releases This Week

NZDUSD Economic Docket

Other Setups in Play:

Looking for more trade ideas? Review DailyFX’s Top Trading Opportunity of 2016

---Written by Michael Boutros, Currency Strategist with DailyFX

Join Michael for Live Weekly Trading Webinars on Mondays on DailyFX at 13:30 GMT (8:30ET)

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