Why the Dow Jones and the NZDUSD appear vulnerable
The month of September is statistically the weakest month of the year for U.S equities. The average decline in September over the past ten years has been -0.60%. Negative prints can be observed in five of the ten years, including a -7% fall in 2011, a -2.5% fall in 2015, and a -4% fall in 2020.
Share this:
Last night the S&P500 and the Dow Jones closed lower for a third straight session, providing an initial indication that the negative seasonal tendencies of September may again be set to play out.
The Dow Jones appears to be the most willing participant of the three key U.S. equity indices in exploring the downside after closing for a second day below the uptrend support from the March 2020 low.
In the F.X. space, the U.S dollar index has benefited from risk aversion buying the past three sessions. Should the U.S. dollar continue to rally on the back of further equity weakness, the NZDUSD appears vulnerable.
While New Zealand’s covid outbreak now appears under control enabling the government to lift restrictions across most of the country, possibly as early as this afternoon, Auckland is expected to remain in lockdown until late September.
Based on this, Goldman Sachs forecast the current lockdown to shave 3.5-4ppt off Q3 GDP. While this is unlikely to stop the RBNZ from raising rates in October and November of this year, it increases the risks that the NZDUSD may be susceptible to a pullback.
In recent weeks, the NZDUSD rallied over 5% to a high of .7170, above the 200 day moving average at .7118, and trend channel resistance at .7150 from the February .7465 high.
The move to the .7170 high appears to have been a false break higher out of a well-established trend channel. If U.S. stock markets continue to wobble, it would not be difficult to imagine some mean reversion in the NZDUSD back below .7000c.
As such, consider opening short NZDUSD positions near .7100c, with a stop loss placed above .7175 and looking to take partial profit near .7000c and again near .6950.
Source Tradingview. The figures stated areas of September 9, 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
The complete CFD trading experience
Award-winning platforms, competitive spreads, low commissions and dedicated support.
We live and breathe the markets and are dedicated to helping traders realise their ambitions as we continue to set the industry bar.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
AUD/USD hammered by US yields and fading RBA hike bets
US yields, dollar strength and fading RBA hike bets have combined to drive AUD/USD to fresh multi-month lows. The macro and technical bias remains bearish, although history suggests parts of the move are now reaching unusually stretched levels.
EUR/USD Forecast: Euro Struggles to Find Support Even After U.S. PCE Data
The euro continues to face a challenging environment in the short term. The currency has struggled to regain ground against a U.S. dollar that remains firmly supported, a dynamic reflected in EUR/USD, which has now recorded three consecutive losing sessions and a decline of roughly 0.6%.
Canadian Dollar Forecast: USD/CAD Four-Week Rally Eyes Yearly Highs 9 30 2026
USD/CAD has advanced in 14 of the past 15 sessions, but stretched momentum raises the stakes as major resistance and NFP come into focus.
StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation.
StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.