The Fed and RBNZ managed the NZDUSD target zone for 10 % width of medium term exchange rate target zone in compliance to Louvre Accord but wider and narrower subject to the actual average traded weighted rate of NZDUSD to JPY, CHF and EUR at upper band/ceiling and at lower band/ceiling by their price stabilization/compression rate. The pair moved from their disequilibrium to equilibrium in compliance to equilibrium exchange rate.
At lower band/ceiling, RBNZ undertook sterilization to slower the weakening of NZD against USD as permitted by the central banks' consensus. The consensus allow for RBNZ to sterilize up to 50 % of the medium term exchange rate target zone to central band/central parity. This sterilization was opportunity for CHF and JPY carry traders for carry trading on NZD and NZD-denominated debt securities and to drive the NZDJPY and NZDCHF to upward wider than 5 % or wider than NZDUSD. However, both Fed and RBNZ maintained the NZDUSD to be sterilized up to 5 % or estimated 50 % of the medium term target zone as permitted by the consensus.
The impact of the CHF and JPY carry trading activity however to put the NZDUSD to be prolonged at central band/central parity for the benefit of RBNZ. However, should the JPY and CHF carry trading activity to be dismissed then the NZDUSD be dropped sharply to downward to visit her new lower band/ceiling of medium term exchange rate target zone. The pair however may pauses at current actual lower band/ceiling before pressured back for another 5 % from the current actual lower band/ceiling. At such, NZDUSD may pauses at 0.6400/0.6500 before the pair pressured down for another 5 %. At what exchange rate the new lower band/ceiling is measured by the average weighted rate on the NZDUSD to JPY, CHF and EUR. However, the combination of price and percentage charting by this TradingViews could be useful to gauge the next 5 % price drop.
This methodology is based on the guidelines and procedures for the assessment and measurement of target zone and sterilization by the Fed and global central banks in compliance to Plaza, Louvre and EMS agreements.
At lower band/ceiling, RBNZ undertook sterilization to slower the weakening of NZD against USD as permitted by the central banks' consensus. The consensus allow for RBNZ to sterilize up to 50 % of the medium term exchange rate target zone to central band/central parity. This sterilization was opportunity for CHF and JPY carry traders for carry trading on NZD and NZD-denominated debt securities and to drive the NZDJPY and NZDCHF to upward wider than 5 % or wider than NZDUSD. However, both Fed and RBNZ maintained the NZDUSD to be sterilized up to 5 % or estimated 50 % of the medium term target zone as permitted by the consensus.
The impact of the CHF and JPY carry trading activity however to put the NZDUSD to be prolonged at central band/central parity for the benefit of RBNZ. However, should the JPY and CHF carry trading activity to be dismissed then the NZDUSD be dropped sharply to downward to visit her new lower band/ceiling of medium term exchange rate target zone. The pair however may pauses at current actual lower band/ceiling before pressured back for another 5 % from the current actual lower band/ceiling. At such, NZDUSD may pauses at 0.6400/0.6500 before the pair pressured down for another 5 %. At what exchange rate the new lower band/ceiling is measured by the average weighted rate on the NZDUSD to JPY, CHF and EUR. However, the combination of price and percentage charting by this TradingViews could be useful to gauge the next 5 % price drop.
This methodology is based on the guidelines and procedures for the assessment and measurement of target zone and sterilization by the Fed and global central banks in compliance to Plaza, Louvre and EMS agreements.
Note
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.