The New Zealand Dollar (NZD) seems to be in a consolidation phase, trading between 0.6015 and 0.6055. In the long run, there is a chance for the NZD to climb, with the next target at 0.6080. In the last 24 hours, the NZD hit a high of 0.6047 but closed at 0.6029, down slightly by 0.29%. We expect the NZD to continue trading within the 0.6015 to 0.6055 range for now.

Potential for Growth

In the next one to three weeks, the NZD may continue to rise if it stays above the strong support level of 0.5985. It’s important to remember that all market forecasts involve risks and require careful research before making financial decisions. We see the current phase of low volatility as a special opportunity for option traders. The narrow trading range means that option premiums, especially for at-the-money options, are lower than usual. This is a great environment for positions that stand to benefit from a future breakout. The possibility for upward movement is backed by strong economic factors in New Zealand. The quarterly inflation rate of 4.0% in the first quarter of 2024 is well above the central bank’s target, prompting a hawkish approach. The decision to maintain the Official Cash Rate at a 15-year high of 5.5% during the May meeting supports the currency’s strength.

Opportunities and Strategies

Given the likelihood of an upward trend, we recommend considering call options with a strike price near the current upper range, like 0.6050. This strategy allows you to gain on a possible surge towards 0.6080 while keeping risk limited to the premium paid. However, it’s essential to stay disciplined and respect the strong support level. To protect against a dip below 0.5985, buying put options with a strike around that level can provide valuable insurance for any long positions. This is a wise move since dropping below this support would challenge the bullish outlook. Historically, times of low volatility and tight ranges often lead to sharp price movements when a catalyst arises. Therefore, a long straddle strategy—buying both a call and a put option at the same strike price and expiration date—might be useful. This position benefits from significant price shifts in either direction, making it wise in the current uncertain environment before a clear trend is established. Create your live VT Markets account and start trading now.

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