NZD/USD – Kiwi Dips to 8-Week Lows, NZ Trade Balance Next

NZD/USD has posted slight losses on Tuesday, following the downward trend in the Monday session. The pair is trading at 0.6720 in the North American session. On the release front, US New Home Sales jumped to 619 thousand, well above the estimate. Richmond Manufacturing Sales declined 1 point, missing expectations. Later in the day, New Zealand releases Trade Balance, with an estimate of NZ$25 million. On Wednesday, New Zealand will release its annual budget.

US housing reports continue to show impressive numbers. New Home Sales surged in April, with an excellent reading of 619 thousand, compared to 511 thousand a month earlier. This figure crushed the estimate of 521 thousand and marked an 8-year high. Last week, Existing Home Sales posted a second straight gain, improving to 5.45 million. This was above the forecast of 5.40 million. The news was not as good from the manufacturing front, as the Richmond Manufacturing Index came in at -1 point, surprising the markets which had expected a strong gain of 9 points. This weak reading follows the Philly Fed Manufacturing Index, which continues to struggle. The indicator posted a decline of 1.8 points, well short of the estimate of a 3.2 point gain. We’ll get another look at key manufacturing data on Thursday, with the release of durable goods reports.

The Federal Reserve’s minutes were more hawkish than expected, and this resulted in strong volatility in the currency markets last week. It has also renewed market speculation about a June rate hike. The Fed is unlikely to make a move if key indicators don’t show improvement, particularly inflation indicators. On Monday, FOMC members James Bullard and John Williams voiced support for further rate hikes. Bullard said that the Fed planned to resume rate hikes if the US economy strengthened, while Williams reiterated that he expected the Fed to raise rates two or three times in 2016. However, there appears to be a gap between what Fed members are saying and market sentiment, as many analysts are projecting only one rate hike this year. The guessing game as to what the Fed has in mind is likely to continue into June, but it’s safe to say that another rate move will be data-dependent, so stronger US numbers will increase the likelihood of a quarter-point hike at the June policy meeting.

NZD/USD Fundamentals

Tuesday (May 24)

• 10:00 US New Home Sales. Estimate 521K. Actual 619K
• 10:00 US Richmond Manufacturing Index. Estimate 9 points. Actual -1 points
• 18:45 New Zealand Trade Balance. Estimate 25M

Upcoming Key Events

Wednesday (May 25)

• 10:00 New Zealand Annual Budget Release

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Tuesday, May 24, 2016

NZD/USD May 24 at 10:50 EDT

Open: 0.6749 Low: 0.6703 High: 0.6751 Close: 0.6739

NZD/USD Technical

• NZD/USD posted slight losses in the Asian session. The pair has been marked by choppy trading in the European and North American sessions
• There is strong resistance at 0.6897
• 0.6739 is fluid and could break in support in the North American session

Further levels in both directions:

• Below: 0.6738, 0.6621 and 0.6542
• Above: 0.6897, 0.7011, 0.7100 and 0.7231
• Current Range: 0.6738 to 0.6897

OANDA’s Open Positions Ratio

The NZD/USD ratio is showing long positions with a majority (55%). This indicates trader bias towards NZD/USD reversing directions and moving upwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.