AUDNZD Buy Entry Setup as Monetary Policy Divergence

5/13/2020 04:41:00 PM

In the week Ahead we hope that AUDNZD will buy.

Entry:

Buy at: 1.0700
Stop Loss: 1.0570
Take Profit: 1.1100
Trade Setup: Swing

Reason: 

NZD is weak. Earlier in the day, the RBNZ Monetary Policy Policy Committee agreed to significantly expand the potential NZ of the Large Scale Asset Purchase (LSAP) program to $60 billion. But it was to be expected. It was the possibility of a negative interest rate that hurt Kiwi the most. Deputy Governor Geoff Bascand made it clear that the RBNZ would like to be prepared for a negative rate by the end of the year. It was this desire to allow negative interest rates in favor of the RBNZ that weakened the NZD.

The Reserve Bank of Australia, by contrast, has strong due to its low risk towards negative rates and is not biased towards them. Thus, we see a divergence between RBA and RBNZ central banks.
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