RBNZ Interest Rate Decision Trading Plan 04/28/10

RBNZ (Reserve Bank of New Zealand) will be releasing its interest rate decision today and it is widely expected that Gov. Bollard will keep rates at the current level of 2.50%; here is the forecast:

5:00pm (NY Time)  RBNZ Rate Decision   Forecast 2.50%    Previous 2.50%
ACTION: NZD/USD        BUY 2.75%             

RBNZ Gov. Bollard

RBNZ is once again expected to leave rates unchanged at in this meeting, as unanimously agreed by all economists surveyed from different news media companies.  As a matter of fact, aside from the bullish statement and hawkish tone during previous RBNZ rate statements from Governor Bollard, there seems to be no other fundamental reasons supporting a rate hike for NZD in the near future.

According to NZIER (New Zealand Institute Of Economic Research), there is no need for RBNZ to raise interest rates before September of 2010, and according to the same article, New Zealand’s economy will only grow a modest 3% this year, making a pre-emptive rate hike completely unnecesary…

On the other hand, if you are a Forex trader, you’d know that sometimes facts and rumors are equally important, and the latter is probably a stronger driver of market sentiment… therefore I wouldn’t be surprised to see some pre-buying of NZD before the rate decision.

The plan for tomorrow will be to wait for a surprise rate hike and get ready to jump in the market on a LONG NZD/USD trade… If we do not get that surprise rate decision, depending on the possible comments from Bollard we might see some limited volatilities in the market.  If Bollard confirms once again that RBNZ’s schedule to hike interest rates is around June, then we could look for a possible entry on LONG NZD/USD; if Bollard changes his view or timetable of the next rate hike, expect to see NZD fall sharply…

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