Forex Market: NZD/USD trading outlook for September 26th 2016

Friday’s trade (in GMT terms) saw NZD/USD within the range of 0.7224-0.7317. The pair closed at 0.7244, retreating 0.94% compared to Thursdays close. It has been the 9th drop in the past 23 trading days, a second consecutive and also the steepest one since September 13th. The daily low has been a level unseen since August 31st, when a low of 0.7216 was registered. In weekly terms, NZD/USD lost 0.28% of its value during the current week. It has been the 19th drop in the past 38 weeks and also a second consecutive one. The major pair has neutralized earlier advance and is now down 0.08% so far during the current month, following three consecutive months of gains. In August NZD/USD went up 0.58%.

On Monday (September 26th) NZD/USD trading may be influenced by the following macroeconomic reports and other events as listed below.

Fundamentals

United States

Fed Speakers

At 13:30 GMT Federal Open Market Committee member Neel Kashkari is to take a statement, followed by Daniel Tarullo at 15:45 GMT and Robert Kaplan at 17:30 GMT. Any remarks in regard to the Bank’s policy stance or US economic outlook would certainly heighten USD volatility.

New Home Sales

Sales of new single-family homes probably decreased 8.8% to the seasonally adjusted annual rate of 597 000 in August, according to market expectations, from 654 000 reported in July. The latter has been the highest level since October 2007. Sales in the Northeast area grew 40% to 35 000 in July, those in the South went up 18.1% to 398 000, while sales in the Midwest increased 1.2% to 84 000. On the other hand, new home sales in the West remained unchanged at 137 000.

The median sales price of new houses sold went down as low as USD 294 600 in July, after being at USD 310 500 in the preceding month. The average sales price rose to USD 355 800 in July from a revised down USD 353 500 in June. At the end of the month, the seasonally adjusted estimate of new houses for sale was 233 000, down 2.9% from a month ago. It has been the lowest level so far in 2016 and represents a supply of 4.3 months at the current sales rate, according to the report by the US Census Bureau.

In case the index decreased more than anticipated, this would have a strong bearish effect on the US Dollar. The Census Bureau is to report the official figure at 14:00 GMT on Monday.

Correlation with other Majors

Taking into account the business week ended on September 23rd and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:

NZD/USD to GBP/USD (0.5676, or strong)
NZD/USD to USD/CHF (0.2287, or weak)
NZD/USD to AUD/USD (0.0390, or very weak)
NZD/USD to USD/JPY (-0.3516, or moderate)
NZD/USD to USD/CAD (-0.4271, or moderate)
NZD/USD to EUR/USD (-0.5064, or strong)

1. During the examined period NZD/USD moved almost independently compared to AUD/USD.

2. NZD/USD moved strongly in one and the same direction with GBP/USD during the week, while moving strongly in the opposite direction compared to EUR/USD.

3. The correlation between NZD/USD and USD/CHF was insignificant.

Bond Yield Spread

The yield on New Zealands 2-year government bonds went as high as 1.925% on September 23rd, after which it closed at 1.890% to lose 2.5 basis points (0.025 percentage point) compared to September 22nd.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.787% on September 23rd, after which it fell to 0.758% at the close to lose 1.6 basis points (0.016 percentage point) compared to September 22nd.

The spread between 2-year New Zealand and 2-year US bond yields, which reflects the flow of funds in a short term, narrowed to 1.132% on September 23rd from 1.141% on September 22nd.

Daily, Weekly and Monthly Pivot Levels

By employing the Camarilla calculation method, the Monday levels of importance for NZD/USD are presented as follows:

R1 – 0.7253
R2 – 0.7261
R3 (Range Resistance – Sell) – 0.7270
R4 (Long Breakout) – 0.7295
R5 (Breakout Target 1) – 0.7325
R6 (Breakout Target 2) – 0.7337

S1 – 0.7235
S2 – 0.7227
S3 (Range Support – Buy) – 0.7218
S4 (Short Breakout) – 0.7193
S5 (Breakout Target 1) – 0.7163
S6 (Breakout Target 2) – 0.7151

By using the traditional method of calculation, the weekly levels of importance for NZD/USD are presented as follows:

Central Pivot Point – 0.7280
R1 – 0.7337
R2 – 0.7429
R3 – 0.7486
R4 – 0.7542

S1 – 0.7188
S2 – 0.7131
S3 – 0.7039
S4 – 0.6946

In monthly terms, for NZD/USD we have the following pivots:

Central Pivot Point – 0.7239
R1 – 0.7392
R2 – 0.7533
R3 – 0.7686
R4 – 0.7838

S1 – 0.7098
S2 – 0.6945
S3 – 0.6804
S4 – 0.6662