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NZD/USD Trading - RBNZ Rate Decision - 09 Nov 2016

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NZD/USD Trading chart 08 Nov 2016
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NZDUSD weighed by Risk off sentiment and rate decision

The New Zealand dollar which surged to a two-month high just yesterday plunged by over 1% in today's trading. The kiwi fell with the markets not in a mood to take on risk. The decline in the kiwi came as a result of the US presidential election results which saw the Republican, Donald J. Trump emerging victorious and being crowned the President Elect.

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The kiwi could come under further pressure today as the Reserve Bank of New Zealand will be releasing its monetary policy decision.

The markets are widely expecting to see a 25bps rate cut from the RBNZ at today's meeting and to this effect, the NZDUSD has shown that the markets have already priced in a rate cut.

In today's RBNZ meeting, while the rate cut already seems like a done deal, the forward guidance from the central bank will be critical in shaping the future outlook for interest rates.

At the moment, there is a wide consensus that the RBNZ could be seen holding rates steady after today's rate cut. This exposes the risk of a shift in the RBNZ’s statement, which if it signals that further rate cuts are warranted it would not bode well for the NZD currency.

The RBNZ’s rate decision is due at 20:00 GMT which will keep the NZDUSD on the edge.

How to trade binary

On the 60-minute technical chart, NZDUSD is seen testing the familiar support of 0.7288 - 0.7300. A break below this support could signal further declines to come, but the current price shows that this support could hold. Therefore, a near term bounce back to 0.7360 is very likely.

The most ideal scenario to trade NZDUSD binary options today is to purchase PUT options at a strike price near 0.7360 for an end of day expiry, which is at 2100 GMT. Price action in the following hours could remain range bound after the initial euphoria of the US elections fades.

The Stochastics oscillator sits in the oversold area as price sits in the support zone, which validates the short term bounce towards 0.7360, which is the ideal price to purchase PUT options.

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