New Zealand Interest Rate Decision Feb. 11- What to Expect
Cory Mitchell, CMT
The Reserve Bank of New Zealand (RBNZ) is meeting today and will decide on whether to hold or change interest rates. The decision will be released on Tuesday, Feb. 11, at 8:00 pm EST.
The rate is currently set at 1%.
The RBNZ is expected to maintain the 1% rate at this meeting, but there is an expectation over the longer-term that they will need to cut again. So traders will be listening for if and when that may be coming.
While an increase or reduction in the rate is unlikely based on this data, it also means that any move other than "no change" by the RBNZ could cause a big move in New Zealand dollar (NZD) currency pairs.
A raise would see the NZD surge against other currencies, while a drop would see it plunge. More likely, if the rate doesn’t change, which is what traders are expecting, the movement overall should be relatively muted. That said, there is always volatility around the announcement since many traders cancel their bids and offers prior to the announcement, and pile them all back in after the announcement.
Also, the language that is used in the announcement can also send shockwaves, as traders shuffle positions based on what is hinted at, discounting a likely move by the RBNZ that may not occur for months from now.
NZDUSD Technical Perspective
As I mentioned in my Forex Majors Weekly Game Plan video, the NZDUSD is not in an interesting position for me to get heavily involved in a swing trade. That said, there are plenty of opportunities on shorter time frames to trade the volatility.
Let's start with the daily chart. The price is in a steep decline but has entered a possible support area.
A rebound would likely stall out near 0.65. That is a prior short-trade area where the price consolidated and broke lower, and also aligns with the falling trendline. That would be an area to look for a short trade again, or if the price consolidates, a short-term move higher.
If the price continues to consolidate in this support band, a breakout of that may setup some shorter-term opportunities.
The hourly chart shows the recent range in NZDUSD, moving between approximately 0.6421 and 0.6378. As the US sessions winds down, that range is likely to hold into the meeting. If it doesn't, watch for a false breakout. A big price move before the announcement is suspicious and likely (but not always) a fake-out move.
Following the announcement, a breakout of the range is tradable. On the upside, looking to see how the price reacts around that 0.6480 to 0.65 region.
On the downside, would be looking for a move toward 0.6340 to 0.6330 and seeing how it reacts there.
Whether it is news or just normal trading, my approach to trading pretty much stays the same. I look for strong support and resistance levels, and in between those I look for consolidation breakouts in the trending direction.
By Cory Mitchell, CMT, join me on Twitter @corymitc.
Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.