NZD/USD hovers above mid-term lows at 0.5700 with US NFP on tap

NZD/USD dips further on Friday and lies right above four-month lows, at 0.5700.
Weak services activity from China added bearish pressure to the Kiwi.
Later on Friday, US NFP data might trigger sharp volatility on US Dollar crosses.

Guillermo Alcala FXStreet

The New Zealand Dollar (NZD) is showing the weakest performance among major currencies in an otherwise calm Good Friday session, with most markets closed on bank holidays. The Kiwi nudges lower against the US Dollar (USD), trading just a few pips above four-month lows, in the 0.5700 area, and with all eyes on the US Nonfarm Payrolls (NFP) release.

The risk-sensitive Kiwi retraced a frail upside attempt and resumed its broader bearish trend on Thursday. US President Donald Trump, who had leaked plans to exit Iran in the coming weeks, left investors puzzled, repeating the same threats of the last three weeks, in a televised message, expected to deliver “important updates” on the Iran war.

Chinese services sector's activity disappoints

Furthermore, service activity data from China has failed to support the Kiwi. The RantingDog Services Purchasing Managers’ Index (PMI) slowed down to 52.1 in March, from a nearly three-year high of 56.7 in February, falling short of the Market expectations of a 53.7 reading.

The report suggests that lower demand and declining international orders are the main reasons for March’s downbeat reading. This endorses concerns about the Pekin authorities' challenges to boost economic recovery amid a weak domestic market, and with geopolitical risks weighing on global trade.

While the Iran war enters its 35th day with no end in sight, investors are likely to shift their focus, at least temporarily, to the US Nonfarm payrolls report. The market consensus anticipates a 60K increase in net employment, with the Unemployment rate steady at 4.4%. With trading volumes at unusually low levels, any significant deviation from these levels might trigger sharp volatility if price action hits liquidity pockets.

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Why it matters to traders?

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

Economic Indicator

Unemployment Rate

The Unemployment Rate, released by the US Bureau of Labor Statistics (BLS), is the percentage of the total civilian labor force that is not in paid employment but is actively seeking employment. The rate is usually higher in recessionary economies compared to economies that are growing. Generally, a decrease in the Unemployment Rate is seen as bullish for the US Dollar (USD), while an increase is seen as bearish. That said, the number by itself usually can't determine the direction of the next market move, as this will also depend on the headline Nonfarm Payroll reading, and the other data in the BLS report.

AUD/USD shows resilience below 38.2% Fibo. near mid-0.7100s

The AUD/USD pair touches a one-and-a-half-week low, around the 0.7140 region during the Asian session on Monday, though it lacks follow-through. Spot prices currently trade just above mid-0.7100s, down nearly 0.25% for the day.

USD/JPY: Japanese Yen edges lower vs USD amid Middle East jitters as Fed, BoJ meetings loom

The USD/JPY pair attracts some buyers at the start of a new week and climbs closer to the 154.00 mark during the Asian session, reversing a part of Friday's losses. Spot prices, however, remain confined in a range held over the past week or so and within striking distance of a nearly seven-month low, touched last Tuesday, as traders await this week's key central bank events.

Gold: Fed’s rate decision to drive the next move

Gold reflects a subdued performance at the start of the Federal Reserve’s (Fed) monetary policy week at around $4,330. Fed’s interest rate expectations heavily influenced last week after the release of the hot United States (US) Producer Price Index (PPI) and Consumer Price Index (CPI) reports for August.

Bitcoin consolidates, Ethereum faces hurdle, XRP nears key support

Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) start the week near crucial technical levels after a broadly bearish performance, correcting over 4%, 1.5% and 5% last week. BTC consolidates around $77,600, while ETH approaches key $2,550 resistance. Meanwhile, XRP trades near its key level around $1.354, making this support level crucial for its near-term outlook.

US Dollar Weekly Forecast: The last line of defense

There was no respite to the downward trend for the US Dollar this week, which added to the prior week’s retracement and at some point flirted with the area of four-month lows. Indeed, after trading at levels just shy of its psychological 100.00 barrier early in the month, the US Dollar Index has come all the way down to challenge the 98.50 zone, extending its negative streak for the third month in a row.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.