Forex Market: NZD/USD rebounds from one-month lows, but still set for biggest weekly loss since mid-May

NZD/USD rebounded from Thursday’s one-month low on Friday, as the US Dollar eased from a two-month peak against peers, but still, market players were not convinced if the greenback’s upward move had been exhausted due to uncertainty surrounding US fiscal stimulus.

“I personally think the dollar’s rise and risk-off trade could continue. The U.S. news coverage is getting dominated by the election. Political uncertainties are likely to weigh on the markets,” Kazushige Kaida, head of FX Sales at State Street Bank’s Tokyo Branch, said.

“That also relates to whether there will be another economic package. No one expects a deal before the election but the economy does need some kind of help by the end of year as Fed officials have said lately.”

US President Trump’s refusal to commit to a peaceful transfer of power if he did not manage to win the election has also added to investors’ anxiety.

Market focus will likely set on US politics next week, as the first presidential debate is to take place on Wednesday.

Despite the small gain on Friday, NZD/USD was still set to register its sharpest weekly loss since the business week ended on May 15th, as the kiwi dollar has been under pressure after the Reserve Bank of New Zealand indicated it could ease policy further and warned the country’s economy might require support for a long time because of the pandemic. NZD/USD has dropped 2.61% so far this week.

As of 6:51 GMT on Friday NZD/USD was edging up 0.41% to trade at 0.6567, while rebounding from Thursday’s low of 0.6512, or the weakest level since August 20th (0.6489). The major pair has retreated 2.38% so far in September, following five straight months of gains.

Meanwhile, today’s focus will be on the US durable goods orders report at 12:30 GMT. New orders for manufactured durable goods probably rose 1.5% in August from a month ago, according to market expectations, following an 11.2% surge in July.

The value of durable goods orders, excluding transportation items, probably rose at a monthly rate of 1.2% in August, according to expectations, following another 2.4% increase in July.

Bond Yield Spread

The spread between 1-year New Zealand and 1-year US bond yields, which reflects the flow of funds in a short term, equaled 7.4 basis points (0.074%) as of 6:15 GMT on Friday, or unchanged compared to September 24th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6538
R1 – 0.6564
R2 – 0.6588
R3 – 0.6615
R4 – 0.6641

S1 – 0.6514
S2 – 0.6488
S3 – 0.6464
S4 – 0.6440