Trade the strong against the weak

One of the key trading principles to really embrace in the FX world is that of pairing strength against weakness.

So, yesterday we had a good example of putting this into practice via a central bank policy decision. This was the decision by the RBNZ.

Going into the RBNZ interest rate decision, you may ask yourself what to do before the RBNZ rate meeting. The answer is simple, you are going to wait. Waiting for the central bank to show its hand. The RBNZ has now done that and that is what gives us a bearish bias.

Yesterday, after the decision we posted this outlook.


Reasons for NZD weakness

The RBNZ launched a set of very bearish policies extending its asset purchases programme. They increased their quantitative easing (LSAP) programme to $100bn from $60bln. Prior to this meeting, there were no expectations of an extension in their bond purchases. Furthermore, they extended the length of the programme from 12 to 22 months. To top off the bearish outlook the RBNZ then expressed a preference for a lower or negative official cash rate as well as a Funding for Lending Programme'. AN extremely bearish position.

So, we now have a short to medium term NZD weak bias, look to pair it with currencies as they show strength.



Learn more about HYCM


High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD consolidating at lows after mixed US data, Powell

EUR/USD trades near a fresh two-month low of 1.1671 after mixed US Markit PMIs, which anyway indicated economic expansion. Fed speakers highlighted the need for more fiscal stimulus.


GBP/USD holds on to daily gains amid Brexit’s optimism

The GBP/USD pair consolidates around 1.2750, underpinned by EU Chief Brexit Negotiator Barnier's optimism on a post-Brexit trade deal. UK Business activity remains in expansion territory according to Markit.


Gold: Elliott Wave downside targets point to the $1767 area

The commodities complex is taking another hit on Wednesday after a tough start to the week. The recent persistent greenback strength has been a thorn in the side of the precious metal since the dollar consolidation began.

Gold News

In search of the Bitcoin anchorage

When the gates of heaven seemed to open, with the moon clearer than ever, selling came back to the crypto board. After the long winter of 2018/2019, hope was already exhausted, and the current setback is finishing with its remains. 

Read more

WTI flirts with the 200-day SMA below $40.00/bbl ahead of EIA

Prices of the WTI are alternating gains with losses below the key $40.00 mark per barrel on Wednesday.

Oil News

Forex Majors