NZD/USD – Kiwi Under Pressure, US Employment Report Impresses

NZD/USD has posted slight losses on Tuesday, as the pair trades at 0.6750 in the North American session. On the release front, US JOLT Job Openings jumped to 5.76 million, well above expectations. Later in the day, the RBNZ will release its Financial Stability Report, which is published twice per year. RBNZ Governor Graeme Wheeler will host a press conference and then testify about the report before a parliamentary committee.

All eyes are on the RBNZ on Tuesday, with the release of the Financial Stability Report and parliamentary testimony from Governor Graeme Wheeler. The markets will be looking for clues regarding the RBNZ’s monetary policy. Is an interest rate cut imminent? Many analysts say that the central bank could lower rates at its next policy meeting in June. Similar to the RBA, the RBNZ would love to raise inflation and at the same time curb the high-flying kiwi, which has put a dent in the critical export sector. However, housing prices in Auckland, the largest city in the country, are very high, and a rate cut could increase demand even more and overheat the housing market. This could have negative repercussions on the New Zealand economy.

Is the US labor market in trouble? Recent employment numbers have been a mix, which has raised concerns about the economy. On Tuesday, JOLTS Jobs Openings surged to 5.76 million, crushing the estimate of 5.55 million. 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. There was concern that NFP, one of the most important indicators, would post soft numbers after weak job numbers earlier this week. ADP Nonfarm Payrolls and Unemployment Claims both missed their estimates. In other releases on Friday, wage levels showed no change, as Average Hourly Earnings posted a weak gain of 0.3%. The unemployment rate remained steady at 5.0%.

The Federal Reserve hasn’t made a move since December’s historic rate hike, leaving the markets looking for hints as to when the Fed might make a move. In its April policy statement, the Fed didn’t raise rates, 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 hike, but last week’s soft payrolls report has greatly reduced the likelihood of a June move. On Friday, 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. Economic releases, 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

Tuesday (May 10)

• 3:15 US FOMC Member William Dudley Speaks
• 6:00 US NFIB Small Business Index. Estimate 93.2. Actual 93.6
• 10:00 US JOLTS Openings. Estimate 5.55M. Actual 5.76M
• 10:00 US Wholesale Inventories. Estimate 0.2%. Actual 0.1%
• 17:00 RBNZ Financial Stability Report
• 17:05 RBNZ Governor Graeme Wheeler Speaks
• 21:10 RBNZ Governor Graeme Wheeler Speaks

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Tuesday, May 10, 2016

NZD/USD May 10 at 10:30 EDT

Open: 0.6769 Low: 0.6714 High: 0.6769 Close: 0.6751

NZD/USD Technical

• NZD/USD posted slight losses in the Asian and European sessions. The pair has reversed directions and posted gains in North American trade
• 0.6897 is a strong resistance line
• 0.6738 was tested earlier in support and is under pressure

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 Tuesday. Long positions have a small majority (52%), indicative of very slight trader bias towards NZD/USD reversing directions and 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.