NZD/USD – Kiwi Under Pressure, US Jobless Claims Slides

NZD/USD is under pressure on Thursday, following losses in the Wednesday session. The pair is trading at 0.6740 in the North American session. In the US, the Philly Fed Manufacturing Index dropped 1.8 points, well below expectations. Unemployment Claims dropped sharply to 278 thousand, close to the estimate. There are no New Zealand releases on the schedule.

The Federal Reserve minutes were released on Wednesday, sending the US dollar broadly higher. The minutes indicated that a June rate hike remains firmly on the table. According to the minutes, the Fed wants to see stronger growth in the second quarter as well as better numbers from the inflation and employment fronts. If this is achieved, the Fed said it “likely would be appropriate” to raise rates at the June meeting. This message is somewhat hawkish, as recent statements from Fed chair Janet Yellen were more cautious in nature, dampening speculation about a June hike. The markets were skeptical that June would be a “live meeting”, but there are no more doubters that the June meeting will be crucial, as it could mark the Fed’s first interest rate hike this year. With the Fed saying that a key factor in a rate hike decision will be the strength of the US economy, key economic indicators will be under the market microscope, especially inflation and employment releases.

New Zealand inflation levels remain weak, underscored by manufacturing inflation numbers earlier this week. PPI Input posted a sharp decline of -1.0%, much weaker than the estimate of +0.3%. This marked the indicator’s second straight decline. PPI Output, a minor event, also posted a decline. The soft figures reflect persistently weak inflation levels which continue to hamper the economy. The RBNZ has sent the message that it is prepared to lower rates if inflation levels don’t improve, so the markets will be closely monitoring New Zealand inflation numbers. Inflation is currently running at 0.4%, well short of the RBNZ’s target of 2.0%. The RBNZ has been reluctant to respond to low inflation with another rate cut, due to concerns overheating the tight housing market. There was better news from the GDT dairy auction, which posted a gain of 2.6%, a strong turnaround after a decline of 1.4% in the previous reading.

NZD/USD Fundamentals

Thursday (May 19)

• 8:30 US Philly Fed Manufacturing Index. Estimate 3.2. Actual -1.8
• 8:30 US Unemployment Claims. Estimate 276K. Actual 278K
• 9:15 US FOMC Member Stanley Fischer Speaks
• 10:00 US CB Leading Index. Estimate 0.4%
• 10:30 US Natural Gas Storage. Estimate 75B

Upcoming Key Events

Friday (May 20)

10:00 US Existing Home Sales. Estimate 5.40M

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Thursday, May 19, 2016

NZD/USD May 19 at 9:50 EDT

Open: 0.6798 Low: 0.6748 High: 0.6801 Close: 0.6745

NZD/USD Technical

• NZD/USD has been marked by choppy trading in the Thursday session
• There is strong resistance at 0.6897
• 0.6738 remains a weak support line

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 has shown movement towards short positions on Thursday. Currently, long and short positions are evenly split, indicative of a lack of trader bias as to what direction NZD/USD will take next. 

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.