Forex Market: NZD/USD trading outlook for August 29th 2016

Friday’s trade (in GMT terms) saw NZD/USD within the range of 0.7221-0.7381. The pair closed at 0.7236, retreating 0.89% compared to Thursdays close. It has been the 11th drop in the past 22 trading days, a second consecutive one and also the steepest one since August 3rd. The daily low has been a level unseen since August 22nd, when a low of 0.7210 was registered. In weekly terms, NZD/USD lost 0.51% of its value during the current week. It has been the 17th drop in the past 34 weeks. The major pair has trimmed its gain to 0.36% so far during the current month, following a 1.04% advance in July.

On Monday (August 29th) NZD/USD trading may be influenced by the following macroeconomic report listed below.

Fundamentals

United States

Personal Income, Personal Spending and PCE Inflation

Personal spending in the United States probably rose 0.3% in July, according to market expectations, while personal income was probably up for a 16th consecutive month in July, increasing at a monthly rate of 0.4%.

Consumer spending, which accounts for over two thirds of the nation’s GDP, rose 0.4% in June, while matching the rate in May. In June, spending on non-durable goods increased 0.7%, spending on services rose 0.5%, while spending on long-lasting manufactured goods such as automobiles shrank 0.3%.

At the same time, personal income increased 0.2% in June, following another 0.2% surge in the prior month. In June, wages and salaries went up 0.3%, proprietors income rose 0.6%, while rental income increased 0.4%. On the other hand, personal dividend income went down 0.7% and personal interest income was 0.3% lower.

Higher-than-expected rates of increase imply good employment conditions and, therefore, are dollar positive. The Bureau of Economic Analysis is to publish the official figures at 12:30 GMT.

Meanwhile, the Core PCE Price Index, the preferred measure of inflation by the Federal Reserve, probably rose 1.6% year-on-year in July, according to expectations, or matching the rate of increase reported in the previous four months. On a monthly basis, the Core PCE Price Index probably increased for a seventh consecutive month in July, going up 0.1%, according to analyst projections.

US Dollar boosted after Yellen hints a rate hike this year still on the table

On Friday the greenback received a strong support against its major peers, after in a statement at the Jackson Hole symposium the Fed Chair, Janet Yellen, noted that the case for a rate hike has strengthened in the past months. According to extracts from her speech at the event: “U.S. economic activity continues to expand, led by solid growth in household spending. But business investment remains soft and subdued foreign demand and the appreciation of the dollar since mid-2014 continue to restrain exports. While economic growth has not been rapid, it has been sufficient to generate further improvement in the labor market.”

“Based on this economic outlook, the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives. Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committees outlook.”

Following Yellens appearance, in an interview with CNBC, the Fed vice chairman, Stanley Fischer, noted that the Feds Chair remarks indicated how close policy makers could be to raise the target range for the federal funds rate, in case incoming macroeconomic data continued to point to a good economic outlook.

Correlation with other Majors

Taking into account the business week ended on August 26th and the daily closing levels of the currency pairs involved, we come to the following conclusions in regard to the strength of relationship:

NZD/USD to GBP/USD (0.8950, or very strong)
NZD/USD to AUD/USD (0.7423, or strong)
NZD/USD to EUR/USD (0.5477, or strong)
NZD/USD to USD/CHF (-0.6310, or strong)
NZD/USD to USD/JPY (-0.7903, or strong)
NZD/USD to USD/CAD (-0.9157, or very strong)

1. During the examined period NZD/USD moved strongly in one and the same direction with EUR/USD and AUD/USD, while moving strongly in the opposite direction compared to USD/CHF and USD/JPY.

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

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 – 0.7251
R2 – 0.7265
R3 (Range Resistance – Sell) – 0.7280
R4 (Long Breakout) – 0.7324
R5 (Breakout Target 1) – 0.7375
R6 (Breakout Target 2) – 0.7396

S1 – 0.7221
S2 – 0.7207
S3 (Range Support – Buy) – 0.7192
S4 (Short Breakout) – 0.7148
S5 (Breakout Target 1) – 0.7097
S6 (Breakout Target 2) – 0.7076

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

Central Pivot Point – 0.7276
R1 – 0.7341
R2 – 0.7447
R3 – 0.7512
R4 – 0.7578

S1 – 0.7170
S2 – 0.7105
S3 – 0.7000
S4 – 0.6894

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

Central Pivot Point – 0.7163
R1 – 0.7373
R2 – 0.7537
R3 – 0.7747
R4 – 0.7958

S1 – 0.6999
S2 – 0.6789
S3 – 0.6625
S4 – 0.6462