NZDUSD takes another dive


Best analysis

The NZ dollar has been hit by a powerful one-two combination that may have crippled it in the near-term. Overnight, Fonterra released the results from its latest GlobalDairyTrade auction, with prices falling 9.3% since the last auction in mid-July and every sub-index in negative territory or flat. This is the 10th auction in a row that prices have fallen and will likely result in a reduced payout to dairy farmers in NZ which is a major problem for the dairy-backed NZ dollar.

The poor auction results were followed this morning by a softer than expected set of employment numbers from NZ for Q2. Employment growth over the quarter was 0.3%, missing an expected 0.5% increase, and Q1’s growth rate was revised lower to 0.6% from 0.7%. The unemployment rate jumped to 5.9% as expected but this was accompanied by a fall in the participation rate in Q2 to 69.3% from 69.6%, missing expectations. The unexpectedly large drop in the pace of employment growth and the fall in participation rate represent the deteriorating health of NZ’s once strong labour market. The only positive in this report was an encouraging 1.2% increase in average hourly earnings, which should have a strong positive effect on inflation if wages continues to growth at anywhere near this pace.

NZDUSD

NZDUSD was also hit by some comments from policy makers in the US that reignited talk of an interest rates rise sooner than expected. NZDUSD is now firmly below 0.6600 and the sell-off only stopped once it hit support around 0.6530. Given the given fundamental risks to NZDUSD in near-term our bias remain lower towards 0.6500, a break of which may confirm a bearish head-and-shoulders pattern in price.

Chart

Source: FOREX.com

Recommended Content


Recommended Content

Editors’ Picks

USD/JPY briefly recaptures 160.00, then pulls back sharply

USD/JPY briefly recaptures 160.00, then pulls back sharply

Having briefly recaptured 160.00, USD/JPY pulls back sharply toward 159.00 on potential Japanese FX intervention risks. The Yen tumbles amid news that Japan's PM lost 3 key seats in the by-election. Holiday-thinned trading exaggerates the USD/JPY price action. 

USD/JPY News

AUD/USD extends gains above 0.6550 on risk flows, hawkish RBA expectations

AUD/USD extends gains above 0.6550 on risk flows, hawkish RBA expectations

AUD/USD extends gains above 0.6550 in the Asian session on Monday. The Aussie pair is underpinned by increased bets of an RBA rate hike at its May policy meeting after the previous week's hot Australian CPI data. Risk flows also power the pair's upside. 

AUD/USD News

Gold stays weak below $2,350 amid risk-on mood, firmer USD

Gold stays weak below $2,350 amid risk-on mood, firmer USD

Gold price trades on a softer note below $2,350 early Monday. The recent US economic data showed that US inflationary pressures stayed firm, supporting the US Dollar at the expense of Gold price. The upbeat mood also adds to the weight on the bright metal. 

Gold News

Ethereum fees drops to lowest level since October, ETH sustains above $3,200

Ethereum fees drops to lowest level since October, ETH sustains above $3,200

Ethereum’s high transaction fees has been a sticky issue for the blockchain in the past. This led to Layer 2 chains and scaling solutions developing alternatives for users looking to transact at a lower cost. 

Read more

Week ahead: Hawkish risk as Fed and NFP on tap, Eurozone data eyed too

Week ahead: Hawkish risk as Fed and NFP on tap, Eurozone data eyed too

Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.

Read more

Majors

Cryptocurrencies

Signatures