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Pairs to Range Trade

US Dollar To Remain Ranging Versus New Zealand Counterpart

Mon, Jul 7 2008, 05:57 GMT
by Ilya Spivak

FXCM

The market has seen little to alter its perspective on the New Zealand dollar since a slew of dire fundamental releases pointed to increasingly deteriorating health for the economy and prompted the RBNZ to signal rate cuts by year’s end. Left wanting for a substantive catalyst, NZDUSD has remained range-bound. A virtually empty calendar for the week ahead suggests more of the same. Ben Bernanke’s dual speech dates amount to a wildcard as the Fed Chief may use the occasions to talk up the dollar.

Trading Tip – Although the Federal Reserve has been leaning towards a hawkish bias, traders still face uncertainty as to the near-term outlook of US monetary policy. Traders may want to pay close attention to Chairman Ben Bernanke’s two speeches this week as inflationary rhetoric will move the market in favor of the USD. In addition to a stop loss, we will look to control risk further by removing any unfilled orders by the end of the week or should spot close below 0.7545

Event Risk for the US and New Zealand

US – Chairman Bernanke will commit to a double-header this week by speaking at the FDIC Forum on Mortgage Lending on Tuesday and then testifying before the House Committee on Financial Services on Thursday. Though nothing specific is expected to be stated, the market will be forced to react to any adversarial rhetoric towards inflation. As many know, Bernanke’s speech in Barcelona last month caused the dollar to rally as the Chairman broke from tradition by speaking out in defense of a strong dollar policy. Furthermore, Friday will see May’s Trade Balance data along with the preliminary estimate of University of Michigan’s Consumer Confidence survey. Unless the number dramatically deviates from expectations, the trade release will most likely have little impact on market volatility due to its backward looking nature. Consumer confidence is expected to come in slightly worse than in the previous month at 55.5 vs 56.4. The expected decline will be substantially smaller than those seen since December when changes in Nonfarm Payrolls were still showing positive jobs growth.

New Zealand – A relatively bare calendar this week begins with the release of June’s REINZ House Sales figure on Wednesday followed by Thursday’s release of the Purchasing Manager Index for June. These two events are likely to add little volatility to the pair as markets have already priced in recent expectations of a weakening New Zealand economic environment and the explicitly stated intent of the RBNZ to cut interest rates by the end of this year.

Published on  Mon, Jul 7 2008, 06:00 GMT

Archive

• GBPCHF Range to Hold on Slowdown Across Europe
  Published On Wed, Aug 20 2008, 08:10 GMT
• Intra-European Trade Links to Keep Euro Ranging Against the Franc
  Published On Thu, Aug 14 2008, 06:14 GMT
• EURGBP Ranges Between Triple Top and Fibonacci Support
  Published On Thu, Jul 31 2008, 13:16 GMT
• Bare UK Calendar Opens GBPAUD for a Range Trade
  Published On Mon, Jul 28 2008, 12:22 GMT
• Fibs Contain USDHKD In a Well-Defined Range
  Published On Fri, Jul 18 2008, 05:57 GMT

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