NZD pushes past 70 ahead of job reports

The New Zealand dollar is in positive territory on Tuesday. In the North American session, NZD/USD trading at 0.7003, up 0.45% on the day.

New Zealand job data eyed

New Zealand employment reports are released each quarter, which makes the impact of each release even greater. Employment Change and the unemployment rate for the second quarter will have added significance, as they are the last tier-1 events ahead of the RBNZ policy meeting on August 18th.

Employment change is expected to post a gain of 0.7%, little changed from the Q1 reading of 0.6%. The unemployment rate has been moving downwards and fell to 4.7% in Q1, down from 4.9%. This positive trend is expected to continue, with a forecast of 4.5% for the second quarter.

In July, CPI jumped 1.3%, pushing annual inflation to 3.3%. This has led to expectations that the RBNZ will raise rates at the next meeting, which would mark the first rate hike since the Covid pandemic. Currently, the markets have priced in a 77% probability of a 25 basis point hike, which would raise rates to 0.50%. Barring a sizeable miss in the upcoming job numbers, the likelihood of a rate call will remain at this level or even go higher, which would be bullish for the New Zealand dollar.

The domestic fundamentals for the New Zealand economy remain strong, as the island nation has done an admirable job of weathering the Covid storm. Still, there is unease over the pandemic, which has shown an upswing in Australia and resulted in the suspension of quarantine-free travel between Australia and New Zealand.

However, the uncertainty generated out of China, due to weak PMIs and warnings about regulatory crackdowns, has investors concerned about the economic outlook and leaves the New Zealand dollar vulnerable if risk appetite wanes further.

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NZD/USD Technical

• There is weak resistance at 0.7031. Above, we find resistance at 0.7087
• On the downside, there is support at 0.6911. The next support line is at 0.6847

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