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RBNZ (Reserve Bank of New Zealand) will be releasing its interest rate decision today and it is widely expected that Gov. Bollard will hike rates today from the current level of 2.75% to 3.00%; here is the forecast:
5:00pm (NY Time) RBNZ Rate Decision Forecast 3.00% Previous 2.75%
ACTION: NZD/USD BUY 3.25% SELL 2.75%
The Trade Plan
With current forecast from over 14 economists surveyed by Bloomberg agreeing that RBNZ will hike rate during this meeting, possibilities of getting in on a trade after the release is not very likely; however, in the event that Gov. Bollard surprises the market by:
1. Keep rates unchanged: We should see a sell-off in the NZD immediately, and a spike trade to sell NZD/USD is recommended.
2. Over hikes to 3.25%: Demand for NZD should soar up, spike trade to buy NZD/USD is recommended.
NZD has been on a rally partly due to the risk appetite sentiment and partly due to RBNZ’s shift in its monetary policy. As it is widely expected for this rate decision to be inline with expectation and hike as expected, market’s demand for NZD should remain strong. However, let me remind everyone that in April, NZIER (New Zealand Institute Of Economic Research) stated that there was 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…
This sentiment was echoed by Governor Bollard’s recent comment in June 10 that GDP is expected to be at 3.1% for 2010. But if we look at recent export activities on dairy products, a 26% increase in May, compared to a year ago, is should be adding some optimism in the economy. Of course, considering the broader market, Credit Suisse is predicting a 125 basis points hike on RBNZ for the next 12 months, therefore it is very likely for RBNZ to hike rates as expected and this tightening policy should continue on until the next meeting.
Important Observation: NZD is a very slow moving currency and for a news of this caliber, decent retracements are not likely. Considering the expectation for this release, if we do get an “as expected”, market will be focusing on the accompanied statement, and if Bollard cautions the market about a possible pause, expect to see huge drop in NZD. If the opposite is true, Bollard remain bullish, then NZD may gain more ground… The most likely scenario is that Bollard reiterates recent rhetoric and market responds with muted reaction…
Also 5:00pm market is usually low in liquidity. Unless we get a surprise, it’s probably best to stay out…
Pre-News Considerations
If NZD/USD drops to the support area, such as 0.7230 level, I would buy it and close before the 5pm betting on the bullish sentiment. But I think the AUD/NZD pair may be the better choice because while RBNZ is expecting to hike interested rate, RBA is expected to leave it unchanged next week. We should see a slow but steady drop in the pair, and a spike up to the 1.2300 level should provide safe SELL that could go from 100 to 300 pips of profit, depending on market sentiment…
Please watch my previous RBNZ trade, I’ll show you how to trade the release even with an as expected release.
Related posts:
- RBA Cash Rate Decision Trading Plan 07/06/10
- RBA Cash Rate Decision 11/02/09
- Trading RBA Cash Rate Decision 06/01/10
- ECB Minimum Bid Rate Decision (Interest rate decision) 12/03/09
- RBA Cash Rate Decision 11/30/09 (Interest Rate Decision)
- Forex Trade Plan For NZ Retail Sales m/m 07/13/10
- RBA Cash Rate Decision 02/01/10
- New Zealand CPI q/q 10/14/09
- RBA Cash Rate Decision 04/06/10
- BOC Interest Rate Decision 07/21/09
Hey Henry
Thank you so much for your help its proving to make me much more relaxed with trading and more knowledgable and profitable. Thank you.
Jonty
Hi Henry,
Just to confess to you again the efficacy of your Fundamental analysis. I read and watched your Video on the the release of the Official Cash Rate of RBNZ and was ready to take action. Well, I have heard some experience in the market but nothing compares with the result I am obtaining from following your analysis.
Immediately the result was released at 3%, which I though was not bad as your forecast of a BUY at 3.25% after a spike, I went ahead and bought the NZD/USD thinking that the market will reverse immediately. That was yesterday. Alas! the market moved against me by as much as 500 pips, although I was trading a small lot size. I held unto your analysis and by this morning, the market had retraced back by about 650 pips, meaning I closed the trade with a profitable 150 pips.
THanks and do have a great day. Say me well to your wife.
Seconds before the release my broker set the spread : 66 pips, Agter the release the spread was around 75 pips. =(.
Thanks for the pre-news consideration. =)
Fxopen shift my sell stop command down about 23 pips !! But I still made some profit by spike down. I will have to switch to ECN account. Perhaps it will solve the problems.
Thanks you Henry for your trading plan.
Orion
Very nice and clear video! I know that it was recorded a year ago, but I would be still interested in a DVD with the trading principles that you mentioned.
In your e-mails, you mentioned the notion of “spike trade” – I wonder if you have a training video on that.
I am very happy with your emails and videos. You are holding my hand every step of the way, so I can build up my confidence. Thank you, Henry!
Adriana – I may have some spike trading videos available. But I don’t have many of them, since I don’t take that many spikes.
Hi Henry
Thanks for that..
Look forward to hearing about the video you setting up.
Take care…olie
Aloha, Henry!
I have been playing pennies on micro accounts with poor platforms so I have to hover the trade but with FPA and now your excellent addition to this community I am finally stitching together an understanding of the intricacies of news trading despite the college of hard knocks. I am up almost $2!
$2.00 now and $2,000 later, take baby steps
Henry,
Thanks for your insightful trade video. I have a question, Where do you get your news from. What service do you use? I saw there was audio and also written version of it. Right now I don\’t use any news service but I am planning to get one. Please let me know what service you recommend.
Thanks
I use tradethenews.com for my newswire service.
Great Video Henry. Going to watch the news release for 7/29 tomorrow and demo this trade and see??
Henry
I enjoy your teachings especially combined with live news release and then action plan
Thanks a lot
Hi Henry,
I enjoy watching your videos. Its really a good source of information and learning experience to trade news.
I really enjoy it and hope to have more of this videos. Maybe one day will be able to join you
in your live trading room.
Thank You.
Mohd
Hi Henry,
Great stuffs, trading stress free and profitable for real! Unlike most of the stuffs out there showing huge profits on backtest results, somemore its tweaked.
Do you have any training program?
No not at the moment. I have an educational mentoring that includes live trading, but that registration is closed. I may reopen it in 2011. However, I got something in the works for next week. Stay tuned.