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EUR/NZD – Back to 1.5800?
Tomorrow the marquee event of the week will take place at the end of the day when the RBNZ makes it long anticipated interest rate announcement. Ahead of the event, the market has been generally complacent expecting only a 25bp rate cut. But New Zealand monetary officials have been very aggressive with their rhetoric and it’s not out of the question that they may cut as much as 50bp to push the currency lower.
The RBNZ want to see kiwi below the .7000 mark and generally, when the central bank wants to move the exchange rate, they have the power to do so. So the kiwi could be in a for fall tomorrow if the RBNZ decides to get aggressive with the market.
One way to play the action is through the EUR/NZD cross which is in the process of forming a nice cup and handle formation that suggests a possible breakout towards the 1.5800 level. With support at 1.5400 only a hundred pips away the risk and reward on the trade appears to be quite favorable if you believe the RBNZ rhetoric.