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New Zealand Dollar comes under pressure after sharp deterioration in labor market

  • NZD/USD trades around 0.5860 on Wednesday, down 0.54% on the day.
  • The New Zealand Dollar weakens after the unemployment rate rises more than expected in the second quarter.
  • Markets scale back expectations of further monetary tightening by New Zealand's central bank.

NZD/USD declines to around 0.5860 on Wednesday at the time of writing, down 0.54% on the day, following the release of weaker-than-expected New Zealand employment data. The New Zealand Dollar (USD) comes under selling pressure as investors reassess the outlook for monetary policy.

Data released by Statistics New Zealand showed that New Zealand's Unemployment Rate rose to 5.6% in the second quarter, up from 5.3% in the previous quarter and above the market consensus of 5.4%. The reading marks the highest level since 2015, highlighting the continued deterioration in the labor market.

At the same time, New Zealand's Employment Change increased by 0.5% in the second quarter, up from 0.2% previously and above market expectations of 0.2%. The participation rate also rose to 70.7% from 70.4% in the previous quarter, pointing to an increase in labor supply despite softer labor market conditions.

The larger-than-expected increase in unemployment weakens the case for further monetary tightening by the Reserve Bank of New Zealand (RBNZ), weighing on the New Zealand Dollar. Traders now see greater scope for the central bank to maintain a cautious stance as the economy slows.

Markets are now turning their attention to upcoming US macroeconomic releases, including the ADP Employment Change report and the Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI), ahead of Friday's official US employment report.

Chart Analysis NZD/USD

NZD/USD technical analysis

In the one-hour chart, NZD/USD trades at 0.5863 with a mildly bearish intraday bias, holding just above nearby horizontal support while capped by overhead moving average. The pair sits below the 100-hour simple moving average (SMA) at 0.5872 and beneath the downward resistance trend line coming in around 0.5896, keeping rebounds in check. The 200-hour SMA at 0.5829 remains comfortably below price, hinting that the broader downtrend is not aggressive, though the Relative Strength Index (RSI) near 38 suggests lingering downside pressure rather than a clean bullish setup.

On the downside, initial support appears at the recent horizontal floor around 0.5860, followed by a secondary shelf at 0.5849; a sustained break beneath these levels could expose the 200-hour SMA support near 0.5829. On the topside, buyers would need to reclaim the 100-hour SMA at 0.5872 first, with a subsequent push toward the descending trend-line resistance around 0.5896 to signal that bears are losing near-term control.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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