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New Zealand Dollar Forecast: NZD Price Action Eyes GDP Data Due

New Zealand Dollar Forecast: NZD Price Action Eyes GDP Data Due

2019-12-18 15:45:00
Rich Dvorak, Analyst
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NEW ZEALAND DOLLAR FORECAST: KIWI TURNS TO 3Q GDP DATA – NZD LEVELS TO WATCH

  • The New Zealand Dollar will come into the spotlight late during Wednesday’s trading session at 21:45 GMT with gross domestic product data due for release
  • NZD prices appear primed for big moves as forex traders respond to the 3Q GDP report out of New Zealand judging by above-average readings of Kiwi overnight implied volatility
  • The RBNZ could be pressured to ease monetary policy further if signs of economic weakness revealed in upcoming New Zealand GDP data translates into softer inflation and employment

NZD price action will be front and center later today with the Kiwi due to react sharply to upcoming 3Q New Zealand GDP report due at 21:45 GMT. Correspondingly, New Zealand Dollar overnight implied volatility is spiking to extremes ahead of the high-impact data release (detailed on the DailyFX economic calendar).

NEW ZEALAND DOLLAR IMPLIED VOLATILITY & TRADING RANGES (OVERNIGHT)

New Zealand Dollar NZD Implied Volatility Trading Ranges ahead of 3Q 2019 GDP Data

Take a look at this insight on how to trade the Top 10 Most Volatile Currency Pairs

In fact, NZD/USD overnight implied volatility of 11.6% headed into the 3Q GDP data release ranks in the top 97th percentile of readings taken over the last 12-months and compares to its 20-day average reading of 7.2%.

NZD/USD MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -9% -8% -8%
Weekly 23% -9% -3%
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GBP/NZD is expected to be the most active New Zealand Dollar currency pair during Wednesday’s trading session judging by its overnight implied volatility reading of 13.7%. Options-implied trading ranges are calculated using 1-standard deviation (i.e. 68% statistical probability price action is contained within the implied trading range over the specified time frame).

NZD/USD PRICE CHART: WEEKLY TIME FRAME (JANUARY 2018 TO DECEMBER 2019)

NZDUSD Price Chart New Zealand Dollar Technical Analysis

Turning attention to a weekly NZD/USD price chart brings to focus the Kiwi’s longstanding downtrend against its US counterpart. Though the New Zealand Dollar is flirting with a topside breakout above this negatively-sloped trendline extended through the April 2018, March 2019 and December 2019 swing highs recorded by spot NZD/USD.

That said, upcoming 3Q New Zealand GDP report could provide traders with a fundamental catalyst that propels the Kiwi above this area of technical resistance or sends NZD/USD prices pivoting back lower. This will likely be predicated by changes in Reserve Bank of New Zealand (RBNZ) interest rate cut probabilities.

Check out this recent NZD market alert: New Zealand Dollar Spikes as RBNZ Holds Rates, Guidance Now Key

RESERVE BANK OF NEW ZEALAND (RBNZ) INTEREST RATE CUT PROBABILITY (MAY 2020)

Chart of RBNZ Interest Rate Cut Probability New Zealand Dollar Forecast

According to the latest overnight swaps pricing, traders are estimating a 28.2% probability that the RBNZ will cut its policy interest rate – the overnight cash rate (OCR) – by the central bank’s May 2020 monetary policy meeting.

Read More – US Dollar Volatility Report: USD/CAD, GBP/USD, NZD/USD, USD/JPY

-- Written by Rich Dvorak, Junior 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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