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New Zealand Dollar Forecast: Kiwi in Focus as RBNZ Decision Looms

New Zealand Dollar Forecast: Kiwi in Focus as RBNZ Decision Looms

Rich Dvorak, Analyst

NEW ZEALAND DOLLAR EYES RBNZ MEETING ON DECK: NZD/USD, NZD/JPY, AUD/NZD, EUR/NZD, GBP/NZD – LEVELS TO WATCH

  • New Zealand Dollar implied volatility pushes extremes ahead of the RBNZ decision due
  • NZD/USD price action is expected to be most volatile with an overnight IV reading of 22.3%
  • The RBNZ could weigh negatively on the Kiwi if the central bank jawbones the currency lower

The New Zealand Dollar could be due for heightened market activity on Wednesday. This is judging by NZD implied volatility readings, which are extremely elevated, as FX traders gear up for a scheduled monetary policy update from the Reserve Bank of New Zealand (RBNZ).

NZD/USD Bullish
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Change in Longs Shorts OI
Daily -10% -7% -8%
Weekly -15% 10% -1%
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RBNZ INTEREST RATE DECISION DUE 12 AUGUST 2020 AT 02:00 GMT

New Zealand Dollar Price Chart RBNZ Rate Decision August 2020

Chart Source: DailyFX Economic Calendar

The RBNZ interest rate decision is due Wednesday, August 12 at 02:00 GMT and a press conference spearheaded by RBNZ Governor Adrian Orr will follow. Market consensus expects the RBNZ to keep its benchmark policy interest rate unchanged at 0.25%. That said, it is possible that the Reserve Bank of New Zealand takes the opportunity to try and jawbone the Kiwi lower as they did with their prior monetary policy press statement by detailing that “appreciation of New Zealand’s exchange rate has placed further pressure on export earnings.”

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NZD PRICE OUTLOOK – NEW ZEALAND DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)

NZD Price Chart New Zealand Dollar Forecast NZDUSD NZDJPY AUDNZD EURNZD GBPNZD Trading Ranges

As one might expect around central bank meetings, there often is a material increase in the potential for currency volatility. The upcoming RBNZ decision provides a good example of this as New Zealand Dollar overnight implied volatility readings spike to extreme highs headed into Wednesday’s interest rate decision.

NZD/USD is anticipated to be the most volatile New Zealand Dollar currency pair during tomorrow’s trading session. This is judging by NZD/USD overnight implied volatility of 22.3%, which ranks in the top 97th percentile of measurements taken over the last 5-years, and is above its 20-day average implied volatility reading of 11.6%.

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Correspondingly, spot NZD/USD price action is anticipated to fluctuate within a 154-pip trading range between 0.6504-0.6658 over the next 24-hours. Statistically speaking, this options-implied trading range of technical support and resistance is estimated to contain spot price action 68% of the time.

Keep Reading: NZD/USD Outlook Hinges on RBNZ Amid Failure to Test January High

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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