Binary Options Analysis – Trade of the Week: NZD/USD 23rd December 2014

United States – Existing Home Sales

Yesterday, at GMT 3:00 p.m., the US National Association of Realtors released the existing home sales number, which is the annualized number of residential buildings that were sold during the last month in the country. However, this figure excludes the number newly building constructions.

Since the sale of an existing home usually has a wide-spread positive ripple effect in the local economy, collectively this figure acts as an excellent leading indicator of the overall economic health of the country. Therefore, economists and binary options traders consider the existing home sales number to be an important data as it tends to have a considerable market impact.

Last month, the US existing home sales figure came out at 5.25 million and the forecast for this month was set at 5.21 million. However, unexpectedly the actual existing home sales number came out much lower, at 4.93 million.

New Zealand – Trade Balance

Later in the night, at GMT 9:45 p.m., the Statistics New Zealand published the trade balance figure, which measures the difference in value between total import and export made by New Zealand’s economy during the previous month.

Export demand and the national currency demand are directly correlated as foreigners have to convert their currency into New Zealand Dollar in order to pay for the goods and services from New Zealand. Hence, a positive trade balance indicates that there was more demand for the local currency against other foreign currencies.

During November, the New Zealand’s trade balance was negative 911 million and the forecast for this month was set at negative 550 million. However, the actual trade balance figure came out much lower, at negative 213 million.

Trade Recommendation for the NZD/USD

Chart NZDUSD, D1, 2014.12.23 08:23 UTC

The NZD/USD has been trending downwards amid the great performance of the US economy since mid-2014. However, on November 12, the pair broke above the major downward sloping trend line and bulls pushed the price towards the resistance level around 0.7970. Although the trend line was broken, the NZD/USD price could not penetrate above the 0.7970 level and the price resumed the downtrend, staying close to the trend line for the rest of November.

Since November 12, the NZD/USD price has been trading within a narrow range between 0.7970 and 0.7710, with some minor penetration on the downside.

The lower than expected US existing home sales and better than expected New Zealand trade balance suggests that the NZD/USD bulls will be looking to push the price towards 0.7970. However, first they have to break the intermediate trend line (dotted green) in order to do so. In that situation, once the trend line is broken, binary options traders should consider placing a CALL above the intermediate trend line with an exit target around the 0.7970 level.

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About our Forex Analyst:  Asif Imtiaz

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