Global macro overview for 09/10/2017

Global macro overview for 09/10/2017:

The result of New Zealand's general election was finalized over the weekend, but remains inconclusive, so uncertainties remain. Accounting for 422,094 special votes caused the preliminary result to change as expected: Labour Party and Green Party each picking up an extra seat, the National Party losing two seats. The NZ First party remains the monarch-maker, with major blocs National/Act (57 seats), on the center-right, and Labour/Green (54 seats), on the center-left, both shy of the 61 seat majority required to govern alone. It remains unclear which way NZ First will swing, and when it will announce its intentions.

In conclusion, the election-related uncertainty hanging over NZD markets is likely to persist until the composition of the government is announced.With the economy at a crossroads as housing, construction, tourism, and migration all come off their peaks, gaining some political certainty is going to be key to avoid a more abrupt loss of confidence and sharper slowdown of the New Zealand economy. That situation would definitely have an impact on NZD as it could be pushed even lower across the board.

Let's now take a look at the NZD/USD technical picture at the H4 time frame. The market has broken below the daily technical support at the level of 0.7089 and made a new local low at the level of 0.7057. The market conditions look oversold, so a corrective bounce towards the level of 0.7089 is expected soon. In a case of a deeper correction, the next technical resistance is seen at the level of 0.7131.

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