Forex Market: NZD/USD daily trading forecast

Friday’s trade saw NZD/USD within the range of 0.6332-0.6459. The pair closed at 0.6397, soaring 0.74% on a daily basis, or the most considerable daily gain since September 9th, when it appreciated 0.80%. The daily high has been the highest level since August 31st, when the cross reached a high of 0.6481. In weekly terms, NZD/USD gained 1.27%, marking a second consecutive week of increase. It has been the sharpest weekly gain rate since the week ended on August 23rd, when the pair went up 2.23%.

At 9:30 GMT today NZD/USD was losing 0.77% for the day to trade at 0.6348. The pair touched a daily low at 0.6338 at 8:35 GMT.

Today the cross may be influenced by a number of macroeconomic reports as listed below.

United States

Existing Home Sales

The index of existing home sales in the United States probably fell 1.4% to a level of 5.51 million in August compared to July, according to the median estimate by experts. If so, this would be the first drop in the past four months. In July compared to June existing home sales rose 2.0% to 5.59 million, or the highest level since May 2010 (5.66 million). The sample of data encompasses condos, co-ops and single-family houses.

Statistical data on existing home sales is often used along with statistical figures regarding the new home sales and pending home sales, with the major objective being to draw a conclusion how the nation’s housing sector is performing, regardless of interest rates. The most active house-purchasing period in the United States is usually between the months of March through June. Therefore, in case statistical data revealed a sudden drop in the number of homes sold rather than an improvement during this period, this would be considered as a signal of weakness in the country’s housing market.

The report on existing home sales usually does not cause a real direct impact on US economy. Actually, this effect appears to be minimal, due to the fact that nothing is produced with the mere sale of an existing home. In terms of economic activity, the sale of an existing house may be related only to interior design and purchases of new furniture.

In case the index dropped at a steeper monthly rate than anticipated, this would have a moderate bearish effect on the US dollar. The National Association of Realtors (NAR) is to release the official figure at 14:00 GMT.

Correlation with other Majors

Taking into account the week ended on September 20th 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 AUD/USD (0.7555, or strong)
NZD/USD to GBP/USD (0.3378, or moderate)
NZD/USD to USD/CHF (0.1671, or weak)
NZD/USD to USD/JPY (-0.1601, or weak)
NZD/USD to EUR/USD (-0.2748, or weak)
NZD/USD to USD/CAD (-0.3140, or moderate)

1. During the examined period NZD/USD moved strongly in one and the same direction with AUD/USD.

2. NZD/USD moved to a moderate extent in the opposite direction compared to USD/CAD during the past week, while moving to a moderate extent in one and the same direction with GBP/USD.

3. The correlation between NZD/USD and USD/CHF, NZD/USD and USD/JPY, NZD/USD and EUR/USD was insignificant during the period in question.

Bond Yield Spread

The yield on New Zealand’s 2-year government bonds went as high as 2.465% on September 18th, after which it closed at the exact same level to lose 3.5 basis points (0.035 percentage point) on a daily basis. It has been the first drop in the past three trading days.

The yield on US 2-year government bonds climbed as high as 0.690% on September 18th, after which it fell to 0.678% at the close to lose 0.008 percentage point for the day, while marking a second consecutive trading day of decline.

The spread between 2-year New Zealand and 2-year US bond yields, which reflects the flow of funds in a short term, shrank to 1.787% on September 18th from 1.814% during the prior day. The September 18th yield spread has been the lowest one since September 16th, when the difference was 1.669%.

Meanwhile, the yield on New Zealand’s 10-year government bonds soared as high as 3.350% on September 18th, after which it closed at the exact same level to lose 3.5 basis points (0.035 percentage point) compared to September 17th. It has been the first decrease in the past four trading days.

The yield on US 10-year government bonds climbed as high as 2.197% on September 18th, after which it slipped to 2.134% at the close to lose 5.8 basis points (0.058 percentage point) on a daily basis, while marking a second consecutive trading day of decrease.

The spread between 10-year New Zealand and 10-year US bond yields expanded to 1.216% on September 18th from 1.189% during the prior day. The September 18th yield difference has been the largest one since August 19th, when the spread was 1.226%.

Daily and Weekly Pivot Levels

By employing the traditional calculation method, the daily pivot levels for NZD/USD are presented as follows:

Central Pivot Point – 0.6396
R1 – 0.6460
R2 – 0.6523
R3 – 0.6587

S1 – 0.6333
S2 – 0.6269
S3 – 0.6206

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

Central Pivot Point – 0.6382
R1 – 0.6474
R2 – 0.6550
R3 – 0.6642

S1 – 0.6306
S2 – 0.6214
S3 – 0.6138