Forex Market: USD/HKD trading forecast for Monday

Friday’s trade saw USD/HKD within the range of 7.7500-7.7504. The pair closed at 7.7502, gaining 0.01% on a daily basis, while losing 0.01% for the whole week.

Fundamental view

United States

Activity in US services sector probably slowed down in August, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 59.9, according to the median forecast by experts. In July the PMI stood at 60.8. The index is based on a monthly survey, encompassing 400 business entities, operating in the services sector. Respondents give their estimate in regard to business conditions – sales, employment, inventories, prices. Values above the key level of 50.0 indicate optimism (expanding activity). As services comprise a dominant part of nations GDP, the performance of this indicator is of key importance for overall economic development assessment. Higher PMI readings would support the national currency. The preliminary data by Markit Economics is due out at 13:45 GMT on Monday.

Sales of new single-family houses in the United States probably reached the seasonally adjusted annualized level of 425 000 in July, following a level of 406 000 units in June, as the latter was 8.1% lower compared to that in May. The median sales price of new houses sold in June was $273 500, while the average sales price was $331 400. The seasonally adjusted estimate of new houses for sale at the end of June was 197 000, which represents a supply of 5.8 months at the current rate of sales.

The report on new home sales has a considerable impact on financial markets, as new home sales can trigger a rise in consumption. It is also an excellent indicator of any economic downturns or upturns due to the sensitivity of consumer income. For example, when new home sales drop over several months, this usually is a precursor to an economic depression.

However, there are several points to watch out for, when interpreting the New Home Sales numbers. First, the statistics does not record any houses that are not going to be sold immediately. For example, the case, when a house is commissioned to be built on an existing plot of land that the purchaser owns.

Second, the statistics are taken at the point, where a customer has signed a sales contract or has put a deposit down. At this point, the house can be at any stage of construction.

Third, the sales figures are not adjusted to take into account sales contracts, which are eventually canceled by the builder or the customer. However, the same house is not included in any subsequent count, when it is eventually sold to another customer.

Higher than expected rate of increase in the new home sales index is usually dollar positive. The Census Bureau is scheduled to publish the official data at 14:00 GMT on Monday.

Hong Kong

At 8:30 GMT Hong Kongs Census and Statistics Department is to report on nations trade balance in July. In June Hong Kong registered a trade deficit of 43.105 billion HKD, or an increase from 42.350 billion HKD in the prior month and following a record high deficit figure of 55.290 billion HKD in April. In June exports rose at an annualized pace of 11.4% to reach 309.2 billion HKD, while imports increased 7.6% to 352.3 billion HKD.

The trade balance, as an indicator, measures the difference in value between country’s exported and imported goods and services during the reported period. It reflects the net export of goods and services, or one of the components to form country’s Gross Domestic Product. Generally, exports reflect economic growth, while imports indicate domestic demand. Hong Kongs main exports include electronics and household electrical appliances, clothing and footwear, textile yarn and fabrics, toys and games, watches. Imports consist mostly of machinery and equipment, manufactured goods, mineral fuels, food.

In case the trade balance deficit continued to widen, this would have a bearish effect on the Hong Kong dollar.

Technical view

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 7,7502. In case USD/HKD manages to breach the first resistance level at 7,7504, it will probably continue up to test 7,7506. In case the second key resistance is broken, the pair will probably attempt to advance to 7,7508.

If USD/HKD manages to breach the first key support at 7,7500, it will probably continue to slide and test 7,7498. With this second key support broken, the movement to the downside will probably continue to 7,7496.

The mid-Pivot levels for Monday are as follows: M1 – 7,7497, M2 – 7,7499, M3 – 7,7501, M4 – 7,7503, M5 – 7,7505, M6 – 7,7507.

In weekly terms, the central pivot point is at 7,7504. The three key resistance levels are as follows: R1 – 7,7508, R2 – 7,7514, R3 – 7,7518. The three key support levels are: S1 – 7,7498, S2 – 7,7494, S3 – 7,7488.