NZD/USD – Kiwi Edges Higher, New Zealand Data Mixed

NZD/USD has posted small gains on Thursday, as the pair trades at the 0.6840 in the North American session. On the release front, New Zealand Business NZ Manufacturing Index improved to 56.6 points, while the Food Price Index softened to 0.3%. In the US, Unemployment Claims were up sharply to 294 thousand, well above the estimate of 277 thousand.  We’ll also hear from three FOMC members during the day. Friday is a data-heavy day, with the US publishing retail sales, inflation and consumer confidence reports.

New Zealand numbers were a mixed bag on Wednesday. The Business NZ Manufacturing Index climbed to 56.6 points, up from 54.7 points a month earlier. However, the FPI dipped to 0.3%, as the economy continues to grapple with low inflation levels. The RBNZ released its Financial Stability Report earlier this week, and the RBNZ noted its concerns, saying that weak global growth, low dairy prices and high house prices posed risks to the New Zealand economy. The soft global economy continues to take a toll on the New Zealand export sector, and RBNZ Governor Graeme Wheeler did not mince words, saying that the outlook for the global economy has “deteriorated” in the past few months. Inflation is currently at 0.4%, well short of the Bank’s target of 2.0%. The RBNZ has been reluctant to respond to low inflation with another rate cut, due to concerns about the housing market. Housing prices continue to rise in Auckland, home to one-third of the country’s population, and lower rates could overheat the housing market and have negative repercussions on the economy.  The RBNZ surprised the markets with a quarter-point cut in March, lowering rates from 2.50% to 2.25%. The Bank stayed on the sidelines in April, and will have a tough decision to make when it sets the Official Cash Rate on June 8.

US employment numbers continue to remain a mixed bag. Unemployment Claims, which have been moving higher, surged last week, hitting 294 thousand. This was the highest weekly claims level since July 2015. On Tuesday, JOLT Job Openings looked sharp in April, jumping to 5.76 million. This figure was much stronger than the estimate of 5.56 million. However, last week’s host of employment numbers were a mix, which predictably has raised concerns about the strength of the US labor market. Last week, Nonfarm Payrolls looked awful, as the key indicator slid to just 160 thousand, well short of the forecast of 203 thousand. This marked the lowest reading in seven months. On a brighter note, wages showed growth, as Average Hourly Earnings posted a second straight gain of 0.3%.

The markets are busy looking for clues as to what the Federal Reserve has planned next. In its April policy statement, the Fed stayed on the sidelines, but the message to the markets with regard to the US economy was one of cautious optimism. The statement noted continuing improvement in the labor market but added that it was keeping a watchful eye on low inflation levels. The Fed statement appeared to leave the open to a June rate hike, but last week’s soft payrolls report has put a damper on speculation about an imminent hike. Last week, New York Fed president William Dudley said he remains confident that the Fed could raise rates as much as twice this year, but many analysts are skeptical if the Fed will raise rates before 2017. The minutes of the April Fed meeting will be released next week, and any clues about a June hike could send the dollar higher against its rivals. Upcoming data, especially employment and inflation indicators, will be major factors as the Fed must decide whether to press the rate trigger in June.

NZD/USD Fundamentals

Wednesday (May 11)

• 18:30 Business NZ Manufacturing Index. Actual 56.5
• 18:45 New Zealand Food Price Index. Actual 0.3%

Thursday (May 12)

• 8:30 US Unemployment Claims. Estimate 277K. Actual 294K
• 8:30 US Import Prices. Estimate 0.6%. Actual 0.3%
• 10:30 US Natural Gas Storage. Estimate 60B
• 11:00 US FOMC Member Loretta Mester Speaks
• 11:45 US FOMC Member Eric Rosengren Speaks
• 13:01 US 30-year Bond Auction
• 13:30 US Member Esther George Speaks

Upcoming Key Events

Friday (May 13)

• 8:30 US Core Retail Sales. Estimate 0.3%
• 8:30 US PPI. Estimate 0.3%
• 8:30 US Retail Sales. Estimate -0.3%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 89.9 points

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Thursday, May 12, 2016

NZD/USD May 12 at 11:50 EDT

Open: 0.6814 Low: 0.6801 High: 0.6848 Close: 0.6837

NZD/USD Technical

• NZD/USD has shown limited movement in the Thursday session
• There is resistance at 0.6897
• 0.6738 is providing support

Further levels in both directions:

• Below: 0.6738, 0.6621 and 0.6542
• Above: 0.6897, 0.7011, 0.7100 and 0.7231
• Current Range: 0.6738 to 0.6897

OANDA’s Open Positions Ratio

The NZD/USD ratio is almost unchanged on Thursday, consistent with the lack of significant movement from NZD/USD. Long positions have a slight majority (54%), indicative of slight trader bias towards NZD/USD moving to higher 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.