NZD/USD extends declines amid downbeat Q3 employment data

NZD/USD stretches two-day-old downpour as jobs report keep RBNZ’s November rate cut on cards.
Trade-related optimism likely to fade amid mixed reports, calls for the Fed to stop further rate cuts gain focus.

With the weaker than expected employment data keeping another rate cut from the Reserve Bank of New Zealand (RBNZ) on cards, NZD/USD drops to 0.6378, after flashing intra-day low of 0.6371, during early Asian morning on Wednesday.

The third quarter (Q3) employment report from the Statistics New Zealand portrays increase in headline Unemployment Rate to 4.2% from 4.1% forecast and 3.9% prior. Employment Change was marked lower than 0.3% expected to 0.2% while Participation Rate rose beyond 70.3 mark to match 70.4 prior while Labour Cost Index (QoQ) came in at expectations of 0.6% versus 0.8% prior.

Despite the recently hawkish statements from the RBNZ policymakers, traders keep expecting another rate cut in November. “Market pricing for RBNZ is for 13bp of easing on 13 November, with a terminal rate of 0.72%,” says Westpac.

The kiwi pair’s reversal from 100-day SMA gained additional weight on Tuesday as the US dollar (USD) registered heavy gains initially based on optimism surrounding the US-China trade deal and then cheering upbeat activity data at home.

It’s worth noting that the latest figures for (Global Dairy Trade) GDT Price Index concerning the second half of October crossed 1.9% forecast and 0.5% prior with 3.7% gains. Prices of Whole Milk Powder (WMP) were also up 3.6% to $3,254 per metric tone. Prices of milk are the key to New Zealand economy.

Investors will now focus on the trade headlines amid a lack of major data/events prior to the comments from the US Federal Reserve (Fed) policymakers during the later part of the day.

Technical Analysis

Unless breaking a 100-day Simple Moving Average (SMA) level of 0.6462 buyers are less likely to head towards August month high and 200-day SMA near 0.6590. As a result, odds for the pair’s pullback to 21-day SMA level of 0.6358 ahead of highlighting 0.6330 and 0.6300 rest-points are high.

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