The Week Ahead: Who Will Opt for Negative Interest Rates?

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NZDJPY Awaits RBNZ catalyst

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The New Zealand dollar has slowed down its advance across the board as the Reserve Bank of New Zealand is scheduled to meet on Wednesday.

The probability that the central bank embraces negative interest rates is higher than ever after data showed that the country has slipped into recession for the first time in over a decade.

Policymakers have already hinted at “a package of additional monetary instruments” at their August meeting.

Overnight volatility is likely to increase and drastic measures could push the price lower. 68.80 is a major support to monitor. On the upside, 73.00 is the immediate target should the pair bounce back.

USDCHF Steady Ahead of SNB Meeting

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The US dollar is struggling to hold onto the psychological price tag of 0.9 after four months of sell-off.

The Fed has stopped short of topping up its easing program and upgraded its 2020 economic forecast to a less gloomy one instead.

While this helped the greenback claw back some losses, there is yet to be a catalyst for a bullish reversal.

Meanwhile, as the Swisse’s outperformance has become a chronic headache for the SNB, a potential intervention to cap the Alpine currency is a risk event to keep in mind.

The pair is in a narrowing range between 0.9000 and 0.9200. A breakout in either direction would dictate the next momentum.

EURCAD Grinds Higher as ECB Stays on Sidelines

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The euro has kept its edge against the Canadian dollar after the ECB adopted a wait-and-see attitude.

The fact that markets would not expect additional intervention before the end of the year means there is an effective floor to the single currency’s exchange rate.

This week’s PMI data may heighten short-term volatility. Favorable readings from both Germany, Europe’s largest economy, and the eurozone could consolidate a picture of economic recovery, giving the euro extra momentum.

Sentiment remains bullish as long as the pair stays above 1.5410. The double top at 1.5980 is a key resistance to lift.

GBPAUD Recovers from 13-Month Low

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Trading Sterling is certainly not for the faint of heart lately with the revival of Brexit-driven volatility.

Add to that the recessionary background and the roller coaster is ready to launch.

The EU’s hint at an eventual trade deal despite the latest Internal Market Bill saga was enough to prop up bids in the British currency. However, one should not forget that the Bank of England may have the last word as it is pondering the likelihood of negative interest rates. This alone could weigh on the exchange rate.

The pound is climbing back to the 30-day moving average and could meet stiff selling pressure around 1.8300.

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