Hey folks,
We have 2 news releases to trade today:
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1500 NZD Interest Rate Decision (no change at 3.00%) - All analyst's estimates for this release are for the RBNZ to hold rates steady at 3%. This release comes with statements for RBNZ Bollard, which is most likely to provide a tradin opportunity. The last 2 decisions have seen the RBNZ hold and there was some initial whipsaw volatility up and down 15-20 pips, before resolving in any direction. Employment, Business Confidence, Retail Sales, PPI and CPI have been higher than forecast however Standard & Poor's Rating agency review the Outlook to negative on Nov.22nd due to the country's Banking Sector and concern of the widening current-account deficit, also the Housing Market and Consumer Spending and Confidence has been weak. Dry weather has also affected the country and this could prompt RBNZ Governor Bolard to lower economic forecasts. Currently analysts are looking for next hike in the 1st or 2nd quarter of 2011. Inflation is likely to peak at 4.8% in mid-2011 which is above the RBNZ's target of 1-3%.
-If they unexpectedly hike rates, NZD/USD should rally 50-80 pips.
-If they unexpectedly cut rates, NZD/USD should rally 50-80 pips.
-If they keep rates unchanged and Bollard does lower growth forecasts, NZD/USD should sell off 20-40 pips and possibly continue depending on risk sentiment, another NZD cross maybe better to take advantage of this. This is what is the most likely senario so the NZD may start to sell off before the release in anticipation of this. The release should confirm this and price should extend.
-If they keep rates unchanged and Bollard doesn't mention the economic effects of the drought or the recent S&P outloook downgrade, and talks about high inflation, then the NZD crosses should rally 20-40 pips and possible go further thru the next session depending on risk sentiment and other Asian-Pacific market factors.
Afterspike -
If any hike or cut, the market would be surprised and alot of position squaring would occur initially so wait for a good retracement of the initial spike to get in. Likewise to a lesser extent if Bollard shows little concern for the slower growth.
Futures traders, the New Zealand contract is one of the more challenging contracts to trade on the CME due to very little volume. I personally do not trade it at all but if you chose to do so, be very mindful of the volume. Direction is the same.
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1930 AU Employment Change and Unemployment Rate (20K and 5.2% expected) -
-Employment Change Range of analyst's estimates 5k - 35k
-UnEmployment Rate Range of analyst's estimates 5.1% - 5.3%k
Both the Employment change and rate are both important and last month they conflicted with both coming out higher (Higher Umemp Rate is bad, Higher Emp Change is good). The Employment change figure was leaked a few seconds before it officially hit the wires and the AUDUSD rallied, then the big deviation higher on the Unemployment Rates and AUDUSD reversed hard. When conflicts do occur they are usually lower than triggers, like last month the change figure was only +9.7. Traders must be vigilant of any excessive volitility seen before the numbers are officially released thru the news wires.
Last week's GDP and Retail Sales were lower for Austrailia, so it will be interesting to see if there has been any slow down in employment as well. This markets have been reacting to this news very well with sometimes smaller deviations causing good moves.
If Employment comes out at 40K or higher (and UR doesn't come out high), AUD/USD should rally 50 pips.
If Employment comes out at 0K or lower, (and UR doesn't come out low), AUD/USD should drop 50 pips.
If UR comes out at 5.4% or higher, (and Emp. doesn't come out too high), AUD/USD should drop 50 pips.
If UR comes out at 5.0% or lower, (and Emp. doesn't come out too low), AUD/USD should rally 50 pips.
Spike Traders - Be prepared with panic stop in case of a leak.
Afterspike Traders - If the deviations are significant and both numbers agree, price could shot up in the first minute quite a bit, and there my be little retracement. Allow prices to settle a bit but be prepared then the get in on a follow thru extension.
Futures traders, be mindful of volume again, even a large deviation can give you quite a bit of slippage on AUD trades. You can certainly trade it using small lots and of course afterspike trades can also work. Direction is the same.
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For those trading forex or futures in the Profit Mongers room, Cactus Jack is running NZD Interest Rates and Doug is running AUD Employment.
To our success!
Sir Pipsalot sirpipsalot@profitmongers.com
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