Friday’s trade saw NZD/USD within the range of 0.6381-0.6465. The pair closed at 0.6445, surging 0.72% on a daily basis, while marking a fourth consecutive trading day of gains. The daily high has been the highest level since August 31st, when the cross registered a high of 0.6481. In weekly terms, NZD/USD added 0.92%, following a 0.17% drop in the week ended on September 27th.
At 9:04 GMT today NZD/USD was gaining 1.05% for the day to trade at 0.6512. The pair overcame the upper range breakout level (R4), as it touched a daily high at 0.6520 at 8:13 GMT. It has been the highest level since August 25th, when a daily high of 0.6567 was reached. The latter is a possible level of resistance.
Today the cross may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
United States
Services PMI by Markit – final estimate
The final Services Purchasing Managers’ Index probably confirmed the preliminary value for September at 55.6, reported on September 25th. If so, this would be the lowest index reading since June, when the PMI was reported at a final 54.8. In August the final seasonally adjusted index stood at 56.1. The PMI is based on data collected from a representative panel of more than 400 private sector companies, which encompasses industries such as transport and communication, financial intermediaries, business and personal services, computing & IT and hotels and restaurants. Values above the key level of 50.0 indicate optimism (expanding activity). In case, however, a larger-than-projected slowdown in services sector activity was reported, this would have a moderate bearish effect on the US dollar. The final data by Markit Economics is due out at 13:45 GMT.
ISM Non-Manufacturing PMI
Activity in United States’ sector of services probably slowed down for a second straight month in September, with the corresponding non-manufacturing PMI coming in at a reading of 58.1, according to the median forecast by experts, down from 59.0 in August. If expectations were met, September would be the 69th consecutive month, when the gauge stood in the area above 50.0, but however, it would be the lowest index reading since June, when a value of 56.0 was reported. The PMI is a compound index, based on the values of four equally-weighted components, which comprise it. These sub-indexes reflect seasonally adjusted new orders, seasonally adjusted employment, seasonally adjusted business activity and supplier deliveries.
The New Orders Index stood at 63.4 in August, down from a reading of 63.8 in the prior month. The Employment Index slipped to 56.0 in August from 59.6 in July, while marking growth for the 18th month in a row, according to data by the Institute for Supply Management (ISM). The Prices Index slid to 50.8 in August from 53.7 in July, which indicated prices rose for a sixth straight month. The Non-Manufacturing Business Activity Index fell to 63.9 in August from 64.9 in July, indicating growth for a 73rd straight month.
Among the 17 services industries, 15 reported growth in August, 1 reported contraction and 1 reported no change in conditions.
In case the PMI slowed down at a larger rate than anticipated, this would lead to a heavy sell-off of the US dollar. The Institute for Supply Management (ISM) is to release the official PMI value at 14:00 GMT.
Correlation with other Majors
Taking into account the week ended on October 4th 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 (0.9769, or very strong)
NZD/USD to USD/JPY (0.3737, or moderate)
NZD/USD to GBP/USD (0.0142, or very weak)
NZD/USD to USD/CHF (-0.0889, or very weak)
NZD/USD to EUR/USD (-0.6722, or strong)
NZD/USD to USD/CAD (-0.9632, or very strong)
1. During the examined period NZD/USD moved almost equally in one and the same direction with AUD/USD, while moving almost equally in the opposite direction compared to USD/CAD.
2. NZD/USD moved almost independently compared to GBP/USD and USD/CHF during the past week.
3. NZD/USD moved strongly in the opposite direction compared to EUR/USD last week.
4. The correlation between NZD/USD and USD/JPY was moderate.
Bond Yield Spread
The yield on New Zealand’s 2-year government bonds went as high as 2.535% on October 2nd, or matching the high from a day ago, after which it slid to 2.525% at the close to gain 1 basis point (0.01 percentage point) on a daily basis, while marking a third consecutive trading day of increase.
The yield on US 2-year government bonds climbed as high as 0.680% on October 2nd, or the highest level since September 29th (0.684%), after which it fell to 0.581% at the close to lose 6.8 basis points (0.068 percentage point) for the day. It has been the fourth drop in the past five trading days.
The spread between 2-year New Zealand and 2-year US bond yields, which reflects the flow of funds in a short term, expanded to 1.944% on October 2nd from 1.866% on October 1st. The October 2nd yield spread has been the highest one since August 25th, when the difference was 1.946%.
Meanwhile, the yield on New Zealand’s 10-year government bonds soared as high as 3.350% on October 2nd, or the highest level since September 28th (3.355%), after which it slid to 3.340% at the close to appreciate 2 basis points (0.02 percentage point) compared to October 1st, while marking a third straight trading day of increase.
The yield on US 10-year government bonds climbed as high as 2.065% on October 2nd, after which it slipped to 1.991% at the close to lose 5.1 basis points (0.051 percentage point) compared to October 1st. It has been the fourth drop in the past five trading days.
The spread between 10-year New Zealand and 10-year US bond yields widened to 1.349% on October 2nd from 1.278% on October 1st. The October 2nd yield difference has been the largest one since July 3rd, when the spread was 1.368%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for NZD/USD are presented as follows:
R1 – 0.6453
R2 – 0.6460
R3 (range resistance) – 0.6468
R4 (range breakout) – 0.6491
S1 – 0.6437
S2 – 0.6430
S3 (range support) – 0.6422
S4 (range breakout) – 0.6399
By using the traditional method of calculation, the weekly pivot levels for NZD/USD are presented as follows:
Central Pivot Point – 0.6399
R1 – 0.6511
R2 – 0.6576
R3 – 0.6688
S1 – 0.6334
S2 – 0.6222
S3 – 0.6157
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