Kiwi in Focus as RBNZ Decides Looms

NEW ZEALAND DOLLAR EYES RBNZ MEETING ON DECK: NZD / USD, NZD / JPY, AUD / NZD, EUR / NZD, GBP / NZD – Levels to See

• New Zealand’s implied volatility shot to extremes due to RBNZ decision
• NZD / USD price action is expected to be most volatile with an overnight IV reading of 22.3%
• The RBNZ could weigh negatively on the Kiwi if the central bank currency falls

The New Zealand dollar could come in for increased market activity on Wednesday. This is assessed on the basis of NZD-implied volatility readings, which are extremely elevated as FX traders prepare for a planned monetary policy update by the Reserve Bank of New Zealand (RBNZ).

RBNZ JUSTICE DISPOSAL DOUBLE 12 AUGUST 2020 AT 02:00 GMT

Graphics Source: DailyFX Economic Calendar

The RBNZ interest rate decision is due on Wednesday 12 August at 02.00 GMT and a press conference spearheaded by RBNZ Governor Adrian Orr will follow. Market consensus expects the RBNZ to keep its benchmark policy rate interest rate unchanged at 0.25%. That said, it is possible that the Reserve Bank of New Zealand will take the opportunity to visit and jawbone the Kiwi army, as they did with their previous press release on monetary policy by detailing that “appreciation of the New Zealand exchange rate” Zealand has put further pressure on export earnings. ”

NZD PRICE RESULTS – NEW ZEALAND DOLLAR IMPLIED VOLATILITY TRADE RANTS (OVERNIGHT)

As one would expect meetings of central banks, there is often a material increase in the potential for volatility in currency. The upcoming RBNZ decision provides a good example of this, as New Zealand dollars during the day implied volatility readings spike to extreme highs leading to Wednesday’s interest rate decision.

NZD / USD is expected to be the most volatile currency pair of the New Zealand dollar during tomorrow’s trading session. This is judged by NZD / USD implied overnight volatility of 22.3%, which ranks in the top 97th percentile of measurements taken over the last 5 years, and is above its 20-day average implied volatility reading of 11.6%.

Correspondingly, spot NZD / USD price action is expected to fluctuate within a 154-pip trading range between 0.6504-0.6658 over the next 24-hours. Statistically speaking, this is options-implied trading range of technical support and resistance is estimated to contain spot price action 68% of the time.

Continue reading: NZD / USD Outlook depends on RBNZ amid failure to test January high

– Written by Rike Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insightt