NZD/USD – Kiwi Sinks to 4-Week Lows on China Concerns

NZD/USD remains under pressure on Thursday, as the pair trades at 0.6650 in the North American session. On the release front, there are no New Zealand events on the schedule. In the US, today’s key event was Unemployment Claims, which was weaker than expected, with a reading of 271 thousand.

The New Zealand dollar has headed south early in the New Year, losing 200 points so far this week. The currency has mimicked the movement of other minor currencies, such as the Australian dollar, which has also suffered sharp losses this week. Why are investors abandoning the New Zealand currency snapping up the safe-haven US dollar? Firstly, investors sought the safety of the US dollar early this week, following weak Chinese manufacturing data which underscored the slowdown affecting the world’s second largest economy. Rising tensions between Saudi Arabia and Iran and a surprise nuclear device test by North Korea further decreased any appetite for risk. The kiwi received another blow after China devalued its currency, the yuan, by over 0.5%. This move has led to sharp declines on the global stock markets and has further dampened interest in risky currencies like the New Zealand dollar.

US job data started off 2016 in style, as ADP Nonfarm Payrolls jumped to 257 thousand in December. This crushed the forecast of 193 thousand, and was the strongest gain since June 2014.Unemployment Claims were not as strong, as the reading of 277 thousand missed the estimate of 271 thousand. Still, the four-week average of jobless claims remains strong. Elsewhere, the ISM Non-Manufacturing PMI came in at 55.3 points, short of the estimate of 56.0 points. However, this reading points to solid expansion in the services sector and underscores that the US economy is headed in the right direction.

On Wednesday, the Federal Reserve released the minutes of its December policy meeting, at which it raised rates by 0.25 percent. The minutes were noteworthy in highlighting differences among policymakers as to whether US inflation levels will improve. Indeed, some FOMC members said that their vote in favor of a rate hike was a close call because of concerns over persistently low inflation readings. The Fed has hinted that the December rate is the first of a series of incremental moves in 2016, but US inflation levels will play an important role in the timing and size of future rate hikes.

NZD/USD Fundamentals

Thursday (Jan. 7)

  • 7:30 US Challenger Job Cuts
  • 8:30 US Unemployment Claims. Estimate 271K
  • 10:30 US Natural Gas Storage. Estimate -95B

Friday (Jan. 8)

  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 203K
  • 8:30 US Unemployment Rate. Estimate 5.0%

*Key releases are highlighted in bold

*All release times are EST

NZD/USD for Thursday, January 7, 2016

NZD/USD January 7 at 15:55 GMT

NZD/USD 0.6650 H: 0.6667 L: 0.6590

 

NZD/USD Technical

S3 S2 S1 R1 R2 R3
0.6368 0.6449 0.6605 0.6738 0.6897 0.7000
  • NZD/USD posted sharp losses in the Asian session and has been choppy in European trade.
  • There is resistance at 0.6738
  • 0.6605 is providing support
  • Current range: 0.6605 to 0.6738

Further levels in both directions:

  • Below: 0.6605, 0.6449 and 0.6368
  • Above: 0.6738, 0.6897, 0.70, and 0.7128

OANDA’s Open Positions Ratio

NZD/USD ratio is unchanged, as short positions continue to retain a majority of open positions (55%). This is indicative of trader bias towards the pair continuing to move to lower levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.