Risk event for the week starting 2 October: RBA, RBNZ rate decisions
Using the trading opportunity around AUD/NZD, the cross could be active over a 24-hour period between Tuesday and Wednesday.
IGTV’s Jeremy Naylor looks at the short trade around the AUD/NZD, where Tuesday will see the Reserve Bank of Australia (RBA) deliver its rate decision followed by the Reserve Bank of New Zealand (RBNZ) on Wednesday. While neither is expected to move, the risk is around the rhetoric which Jeremy says could see the RBA come in with more of a pessimistic view on life.
AUD/NZD
Next week, there are two important events happening that will have an impact on the AUD/NZD currency pair. The first event is the Reserve Bank of Australia's interest rate decision, which will take place on Tuesday. It is highly anticipated that the RBA will keep its lending rate steady at 4.1%, which has been the case for the past few meetings. This will be the first meeting with the new chair of the board, but it is unlikely that any major changes will be made. What traders will be paying attention to is the language and tone of the statement that accompanies the decision.
The Reserve Bank of New Zealand
The second event is the Reserve Bank of New Zealand's interest rate decision, set to happen 24 hours after the Reserve Bank of New Zealand (RBA)'s decision. It is expected that the RBNZ will also keep its official cash rate steady at 5.5%. The key here is the messaging from both central banks. If the RBA's statement shows a more cautious stance on monetary policy compared to the RBNZ's statement, it could lead to a weaker Australian dollar (AUD) compared to the New Zealand dollar (NZD).
The AUD/NZD chart
When we look at the AUD/NZD chart, we can see a recent downward trend, with the AUD weakening against the stronger NZD. This currency pair has been trading within a range of 107.17 to 109.31. Based on the possibility of a more cautious statement from the RBA, traders could consider a short position, with a stop loss around the 108 level, which is currently trading at 107.42. It's important to keep an eye on the 107.17 level - if the AUD/NZD closes below this, it could signal further downward movement, potentially reaching a price target of 105.60.
However, for this scenario to pan out, we would need to see a more optimistic statement from the RBNZ on Wednesday. These two interest rate decisions are the main events to watch out for next week, as they will heavily influence the AUD/NZD currency pair. Traders should carefully monitor the statements and price levels to make informed trading decisions. This video will provide further insights and analysis.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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