NZD/USD – New Zealand Dollar Slips, Markets Eye US Manufacturing Report

NZD/USD has posted sharp losses on Monday, as the pair trades at 0.6740 early the North American session. In economic news, today’s key event is US ISM Manufacturing PMI. The markets are expecting a slight improvement, with the estimate standing at 49.1 points. There are no New Zealand events on the schedule.

The New Zealand dollar has headed south in the first trading day of 2016, dropping about 90 points against the US dollar. Investors have dumped the risky kiwi in favor of the safety haven of the US dollar, following the release of weak Chinese manufacturing data, which has underscored the slowdown affecting the world’s second largest economy. Chinese Caixin Manufacturing PMI, a key indicator, slipped to 48.2 points in December, short of the forecast of 48.9 points. The index managed to break above the 50-point level only once in 2015, pointing to ongoing contraction in the Chinese manufacturing sector. As well, another crisis in the Middle East is brewing, as Saudi Arabia abruptly cut off relations with Iran following the execution of a Saudi cleric which led to the ransacking of the Saudi embassy in Tehran.

The US economy showed strong improvement in 2015, but signs of weakness remain, such as the housing sector. Last week, Pending Home Sales was unexpectedly soft, posting a decline of 0.9%, compared to an estimate of a 0.6% gain. Recent housing indicators have also fallen below expectations. Meanwhile, CB Consumer Confidence sparkled in the December report, as the key indicator jumped to 96.5 points, up sharply from 90.4 points a month earlier. This easily beat the estimate of 93.9 points. This excellent reading followed a solid UoM Consumer Sentiment, which improved to 92.6 points, above the forecast of 92.1 points and marking a 4-month high. Consumer confidence indicators are closely monitored by analysts, as stronger consumer confidence often translates into increased consumer spending, a key driver of economic growth. Strong consumer demand has been an important factor in the strength of the US economy, which led to the historic rate hike by the Federal Reserve in December.

NZD/USD Fundamentals

Monday (Jan. 4)

• 14:45 US Final Manufacturing PMI. Estimate 51.1 points.
• 15:00 US ISM Manufacturing PMI. Estimate 49.1 points
• 15:00 US Construction Spending. Estimate 0.7%
• 15:00 US ISM Manufacturing Prices. Estimate 36.5 points

*Key releases are highlighted in bold

*All release times are GMT

NZD/USD for Monday, January 4, 2016

NZD/USD January 4 at 14:00 GMT

NZD/USD 0.6744 H: 0.6832 L: 0.6736

NZD/USD Technical

• NZD/USD posted sharp losses in the Asian session and has been choppy in European trade.
• 0.6738 is a weak support level. It was tested earlier in the day.
• 0.6897 has strengthened in resistance as the pair trades at lower levels
• Current range: 0.6738 to 0.6897

Further levels in both directions:

• Below: 0.6738, 0.6605, 0.6449 and 0.6368
• Above: 0.6897, 0.70, and 0.7128

OANDA’s Open Positions Ratio

NZD/USD ratio is showing a majority of short positions (55%). This is indicative of trader bias towards the pair continuing to move to lower levels.

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.