Forex Signal (Wed March 9 2011, 3:00pm NY Time EST) - NZ RBNZ Interest Rate

Henry Liu

Former FPA Special Consultant
RBNZ (Reserve Bank of New Zealand) will be releasing its interest rate decision today and it is widely expected that Gov. Bollard will cut rates by 25 basis points today to 2.75%; here is the forecast:

3:00pm (NY Time) RBNZ Rate Decision Forecast 2.75% Previous 3.00%

The Trade Plan
With current forecast from 10 out of 14 economists surveyed by Bloomberg agreeing that RBNZ is likely to cut rates during this meeting and with current market pricing in 100% of the effects of the cut, here are the likely scenarios:

1. RBNZ cuts rate to 2.75%: We should see relative calm market or very little reaction to the rate decision. However, if Gov. Bollard's statements were to lean on the bearish side, market could take that as a sign to sell-off NZD.

2. RBNZ keeps rate at 3.00%: We should see an immediate appreciation of NZD against all majors. I'd be focusing on the AUDNZD pair as it is hovering around 17-year highs.

For more information on my trading method:
Henry's Spike Trading Method

The Market
Ever since NZ's PM public speech on welcoming a rate cut from RBNZ, market has been dumping the kiwi like there is no tomorrow. With current market pricing in 100% of the cut, it is very likely that RBNZ will follow market sentiment.

However, out of 14 analysts surveyed by Bloomberg, only 70% agree that Gov. Bollard will cut rates by 25 basis point... that leaves a good chance for the market to be surprised if RBNZ decides to leave rates unchanged.

Additional Thoughts
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.

Also 3:00pm market is usually low in liquidity. Unless we get a surprise, it's probably best to stay out...

AUDNZD is at a 17 year high and it would be the best pair in my opinion to SELL in the event of an unchanged verdict.

Pre-News Considerations
There are no pre-news trade.

For more information on history charts and data of RBNZ Rate Decision...


Last edited by a moderator: