Trade Watchlist: NZD/CAD Volatility Spike Ahead?

NZD/CAD has potential for large strikes this week with TWO central financial institution statements coming quickly for each currencies.

With the Financial institution of Canada and Reserve Financial institution of New Zealand spark a break within the pair’s tight vary?

NZD/CAD Volatility Spike Forward?

NZD/CAD Daily Forex Chart
NZD/CAD Each day Foreign exchange Chart

Volatility in NZD/CAD has calmed down over the previous two months, sticking to a spread roughly between 0.8630 – 0.8750.

Not solely is that this doubtless the product of a comparatively quiet summer season by way of main information catalysts, but additionally doubtless a operate of rising hypothesis that we may doubtlessly see financial coverage tightening sooner-than-expected from each the Financial institution of Canada and the Reserve Financial institution of New Zealand as inflation rises and the pandemic restoration progresses positively in each Canada and New Zealand.

And talking of the 2 central banks, they’re each giving their newest financial coverage statements this week, which could possibly be a recipe for large volatility coming for NZD/CAD relying on their statements.

Expectations are that neither central financial institution will make adjustments to coverage, however we may see hawkish rhetoric (i.e., hints at earlier tapering measures or pushing ahead charge hike expectations).

This state of affairs would doubtless lead to some volatility however no doubtless robust directional strikes earlier than the top of the week.

A decrease likelihood state of affairs that will happen is that the BOC reduces quantitative easing measures additional, which may attract a response to the Canadian greenback, and in that state of affairs, we’ll be looking out for a break beneath the key help space round 0.8630 earlier than contemplating a brief place to play the longer-term pattern decrease.

After all, any large surprises (i.e., an precise shock charge hike) would spark huge volatility for the respective foreign money, wherein we’d look ahead to a break of the tight vary on NZD/CAD for each a possible short-term and longer-term place play.

What do you all assume?  Is NZD/CAD a purchase? Will the BOC and/or the RBNZ shock merchants this week? Extra rangebound habits forward or will we see the beginning of a contemporary momentum transfer? Let me know within the feedback part beneath!

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