There may be a huge volatility move in NZDUSD on tuesday. There are 2 major reports that are tradeable. First is the RBNZ financial stability report released on 12th Nov 2013 2000GMT. Second is the RBNZ Governor Wheeler speaking on 13th Nov 2013 0000GMT.
Of all the developed countries in the world, the first country most likely to increase interest rates is New Zealand. Remember, most other countries have been cutting interest rates aggressively. ECB has done a surprise cut in Nov to 0.25%, RBA at 2.5% is a historic low, FED at nearly 0% is unheard of, BOE at 0.5% is also at an all-time low. From the chart showing the interest rates movement of NZD, it is presently at 2.5%. And had remained at this level since the 2009 Global Financial Crisis.
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The reason for RBNZ preponderance to increase interest rates is due to the housing boom in Auckland. House price inflation is going through the roof, with speculators buying at a frenzy pace. There are no sales tax and no capital gains tax on buying/selling houses. Foreigners are welcome to buy in NZ and there are little limits to restrict foreigners from buying. No wonder NZ is witnessing the housing boom.
Since the markets are constantly forward looking, any further hints of rate hikes in the Financial Stability Report should cause a bullish sentiment in NZDUSD. Markets are always forward looking. Traders don’t trade based on what happen yesterday. They take trades based on what they expect and think would happen tomorrow. Compared to the stock market where the look ahead timeframe is about 12 months. Due to the immense size of the forex market, the forex market only looks ahead about 3 to 6 months in advance.
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In the Financial Stability Report and the speech by RBNZ Governor Wheeler later in the day, there are expectations of some jawboning to warn the markets of possible interest rate hike in early 2014. In fact, in several occasions this year, RBNZ Governor Wheeler has already hinted broadly of their intentions to hike rates if housing prices continues its upward surge. And house prices appear to be continuing flying on rocket fuel. If RBNZ do hike rates in early 2014, the market would anticipate more rate increases. This in turn, creates more buying of NZD and thus pushing up the value of NZDUSD to greater heights.
http://tvnz.co.nz/business-news/nz-d...cement-5581425
http://www.interest.co.nz/bonds/6634...t-equal-30-bps