NZD/USD en-route to 0.6600 amid US dollar weakness, market optimism
|- NZD/USD extends pullback from 0.6638 near four-day high.
- New Zealand Unemployment Rate has a hidden point to watch before next week’s RBNZ.
- Market sentiment stays positive as hopes of the American aid package grows following downbeat employment signals.
- RBNZ Inflation Expectations, US stimulus talks in the spotlight.
NZD/USD prints a three-day winning streak while picking up the bids near 0.6650. The kiwi pair recently flashed the intraday high of 0.6656 during the initial Asian session on Thursday. In doing so, it stays near the weekly top flashed on Wednesday.
Strong Kiwi employment data has scars…
Although global markets welcomed New Zealand's second-quarter (Q2) Unemployment Rate of 4.0% versus 5.8% forecast and 4.2%, the figures fail to portray the clear picture of the jobs market due to the lockdown-led survey mishap. The same was aptly pointed out by the analysts at the Australia and New Zealand Banking Group (ANZ) as they said, “As the quarter progressed, conditions steadily deteriorated, with unemployment (headline 4.0% and adjusted 4.6%) rising to 6.2% by the final week of the quarter, though sampling errors are very wide. This steady rise partly reflects measurement issues resolving, and job losses genuinely rising as the crisis unfolded.” The same adds to the fears that the RBNZ will have to utter it's fear and show readiness to use unconventional monetary policy tools during its upcoming meet.
Even so, the market sentiment remains positive, backed by hopes of additional stimulus from the US. The same joins broad USD weakness, triggered through downbeat ADP Employment Change and job component of ISM Non-Manufacturing, to please the NZD/USD pair bulls.
While portraying the risk-tone, S&P 500 Futures stay positive beyond 3,300, currently up 0.07% around 3,320, whereas the US 10-year Treasury yields also keep the previous day’s gain to 0.549%.
Looking forward, the pair traders need to watch over the clues suggesting the US policymakers’ nearness to the phase 4 coronavirus (COVID-19) aid package for further upside. Also on the radar will be the third quarter (Q3) prints of RBNZ Inflation Expectations, prior 1.24%.
The American Congress is showing promising signs that the Democrats and Republicans will reach a deal to offer new guidelines for the unemployment claims benefits that expired Friday. Even if they fail, US President Donald Trump is ready to use executive order and make his way. On the other hand, any dismal reading in the kiwi inflation signal could become a spoiler to the pair’s recent run-up.
Technical analysis
A six-week-old rising channel keeps NZD/USD bulls optimistic unless the quote slips below 0.6600. However, a clear break of 0.6716 becomes necessary to challenge the pattern’s resistance around 0.6770.
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