The Reserve Bank of New Zealand (RBNZ) surprises FX traders with 0.5% hike vs expected 0.25% increase
Market Talk
NZD strongest among the G10 during overnight trading
The kiwi advanced sharply higher to lead the G10 FX space after the RBNZ shocked markets with a more aggressive rate hike than what the markets were expecting. This move by a central bank signals to markets that central banks can be aggressive market players.
Some traders look for these low-probability high-return events and trade against market expectations. Although trading against the market is considered high risk, every once in a while these low-probability high-risk trades can pay off.
Bottom line: Central banks have enormous power to move markets. The FX traders who can think like a policy maker but act as a trader might just have an edge.
Have a wonderful trading day!
Today’s Economic Events
- German Manufacturing Orders increased more than expected month on month
- German Germany 40 Index has gained nearly +2% during the last five trading sessions
- French Industrial Production increased month on month
- CAC40 Index has gained nearly +4% during the last five trading sessions
- US ISM non-manufacturing data due
- US services indicators remain in expansion with the ISM Non-Manufacturing index above 50
- Dow 30 index +2% during the last five days
- US weekly crude oil inventories expected to have a smaller drawdown vs the previous week
- WTI crude oil +11% within the last five days
| Time: UTC | Country/Region | Economic Indicator | Previous | Forecast | Actual | Units |
|---|---|---|---|---|---|---|
| 6:00:00 AM | Germany | Manufacturing Orders m/m | 0.5 | 0.5 | 4.8 | % |
| 6:45:00 AM | France | Industrial Production m/m | -1.9 | - | 1.2 | % |
| 6:45:00 AM | France | Industrial Production y/y | -2.2 | - | 1.3 | % |
| 6:45:00 AM | France | Manufacturing Prod m/m | -1.8 | - | 1.3 | % |
| 6:45:00 AM | France | Manufacturing Prod y/y | -1 | - | 2.2 | % |
| 12:30:00 PM | US | Trade Balance | -68.3 | 68.5 | - | USD |
| 2:00:00 PM | US | ISM Non-manufacturing Index | 55.1 | - | - | - |
| 2:00:00 PM | US | Crude Oil Stocks ex. SPR w/w | -7.489M | -2.329M | - | bbl |
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Tactical Trading Ideas & Commentary
Gold price completes the bullish continuation pennant pattern
Gold price hit new year-to-date highs after the completion of the bullish pennant pattern which now seems to have reinforced the multi-week bullish conditions. The next resistance challenge spotted near the $2,035 level, which if price successfully clears above, opens up the prospects for an extension higher toward the $2,070s. Downside risk seen below $1,960 places the key support at $1,920 in view.
Brent Crude Oil bullish conditions seem to be holding
Brent Crude Oil scope for a further higher price extension as potential bullish triple moving average crossover signal could draw in technical traders (see chart 2). The price gap higher after the OPEC announcement to cut production opened the door to support the current bullish technical conditions. Next key resistance spotted near $87.90 while downside risk sits within the $78.25 - $76.30 zone.
EUR / USD breaks above the 1.0930 resistance opening the door for potential further upside extension
EUR / USD cleared above the 1.0930 resistance opening up the prospects for a further price extension towards the March 23 2023 highs near the 1.1030s. Downside risk below 1.0930 could expose 1.0790.
Not investment advice. Past performance does not guarantee or predict future performance.
