- NZD/USD recovered from a bout of early US session weakness and is back above the 0.7150 mark.
- Higher dairy prices have helped NZD perform well despite the stronger US dollar, as traders await key jobs data.
NZD/USD saw a bout of weakness around the time of the US cash equity open, dropping below a key level of support that had been in play since last Friday at 0.7150. The pair fell as low as the 0.7130 mark, but soon recovered these losses and is now trading flat again on the day, just to the north of the 0.7150 mark. Should the bears regain control, the key area of support to be aware of to the downside is around the 0.7100 level (the 18 and 28 January lows).
Driving the day
NZD performed well on Tuesday despite strength in the US dollar that weighed on pronounced weakness in the kiwi’s antipodean counterpart AUD. The Aussie was weighed by a more dovish than expected RBA rate decision outcome, with the bank surprised markets with an announcement that its QE programme will be extended beyond April at a pace of AUD 5B per month. Perhaps the more dovish than expected RBA outcome highlighted the recent shift in market expectations towards RBNZ policy; markets are no longer betting that New Zealand’s central bank will ease policy any further (this cycle) or take rates into negative territory. This means that, with the RBNZ’s OCR rate at 0.25%, New Zealand is set to maintain a 0.15% central bank interest rate advantage over its antipodean peer.
Elsewhere, Fonterra, New Zealand’s (and the world’s) largest dairy exporter raised the prices it pays farmers for milk amid strong demand for its dairy products in China and Southeast Asia, as well as firmer global dairy prices. Strength in dairy prices was reflected in the latest GlobalDairyTrade (GDT) numbers; GDT’s Price Index rose 1.8% WoW and whole milk powder rose 2.3% WoW. Strength in dairy prices is a good omen for New Zealand given the economy’s dependence on agricultural (and in particular dairy) exports, hence why NZD is responding well to developments.
Looking ahead, NZD traders are on notice for the release of the Q4 labour market report at 21:45GMT. ANZ think that though incoming Labour market data may be noisy, it will nonetheless provide clarity on the extent of recent deterioration in the labour market. “We expect the unemployment rate to lift to 5.6%, with risks tilted to slightly higher,” says the bank. Moreover, the bank comments that “wage growth is expected to remain soft, but strength in some industries is likely given skills shortages and the two-speed nature of the economy at present”.
NZD/USD key levels
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.