NZD/USD Weekly Fundamental Analysis, August 24– August 28, 2015 Forecast

Weekly Analysis and Recommendations:

The NZD/USD held up pretty well last week amid mixed messages from the global economy and the U.S. Federal Reserve. The news that Chinese manufacturing activity had hit a 6 ½ year low drove global equity markets down, creating enough market turmoil to suggest that the Fed would likely refrain from a September interest rate hike. This news helped bolster the New Zealand Dollar against the U.S. Dollar.

 

The latest Fed minutes for July, released on Wednesday, sent a mixed message to the markets, creating enough uncertainty to trigger a short-covering rally by the NZD/USD after several weeks of consolidation. Last week’s U.S. economic data, however, suggested the economy may be a track. Nonetheless, the turbulence created by the plunge in global equity markets makes it look as if the Fed may wait until further in the year before hiking rates for the first time since 2006. 

Domestically, the NZD/USD was able to shrug off a decline in consumer confidence to its lowest level since 2012. The drop in dairy prices contributed to the decline, however, this was offset somewhat by lower gasoline prices. 

Because of last week’s mixed signals by the Fed, traders will be looking for further clarification this week about the possibility of a rate hike by the Fed in September. On Monday, FOMC Member Lockhart is scheduled to speak. He may offer some guidance to traders. Later in the week, central bankers will meet for a symposium in the U.S. and another Fed Member Fischer will give a speech on Saturday. 

While traders are trying to focus on the Fed’s September interest rate decision, it is the outside market activity that is causing the volatility. Friday’s strong surge by the New Zealand Dollar corresponded with a steep drop in equity prices. If the selling pressure continues this week then Kiwi traders should expect much of the same upside price action. 

Also likely to influence the markets this week are U.S. Durable Goods on Tuesday and U.S. Preliminary GDP on Thursday. These reports are likely to be overshadowed if stock prices continue to tumble. 

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports. 

Major Economic Events for the Week: 

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