Both the EUR and the NZD have been put on the back foot by widespread USD strength. Over the weekend, global central bankers met to discuss the global economic recovery in Jackson Hole, Wyoming. The topic that dominated the talks appears to be the health of the world’s major labour markets.
Fed Chair Janet Yellen was characteristically cautious about the outlook for the US labour market, despite some recent strong jobs data. She stated that while US hiring has improved, there is still significant underuse of the workforce, and the labour market has yet to fully recover from the financial crisis.
Nonetheless, the infectious optimism about the outlook for the US jobs market penetrated the weekend’s talks. Regional Fed Presidents and hawks Bullard, George and Plosser are keen to kick-off the start of the Fed’s tightening cycle sooner than later, while Williams and Lockhart are committed to sticking to the notion of hiking rate around the middle of next year. Overall, it seems the bulls are getting closer to overwhelming Yellen and her doves.
The strength in the US labour market was set against significant weakness in the economies of Japan and Europe, with both Draghi and Kuroda aware that they me be forced to deploy fresh stimulus to support their beleaguered economies. The highlighting of this divergence by central bankers over the weekend has sent investors flocking to the US dollar and away from the EUR and JPY.
However, the widespread USD strength has infected all of the major pairs, with the NZD being hit particularly hard. Recent doubts about the RBNZ’s planned tightening cycle are weighing on the commodity currency, thus it’s an obvious target for USD bulls. But the possibility of further weakness in EUR and JPY may provide the overstretched NZD with a breather.
EURNZD tech’s also look weak
From a technical perspective, EURNZD is also looking a little shaky. There is a double-top in price and RSI was rejected at a key resistance zone as it failed to break into bullish territory. Also, there is a bearish crossover in daily MACD. This has turned our focus to support zones around 1.5700 and 1.5415.
Source: FOREX.com
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