NZ Dollar Under Pressure, US Nonfarm Payrolls Plummet

NZD/USD has posted considerable losses on Friday, as the pair trades at 0.6830 early in the North American session. There are no New Zealand releases on the schedule. In the US, Nonfarm Payrolls dropped sharply to 160 thousand. Average Hourly Earnings posted a gain of 0.3% and Unemployment Claims remained at 5.0%, as both indicators matched their estimates.

US Nonfarm Payrolls was dismal in April, as the key indicator slid to just 160 thousand, well short of the forecast of 203 thousand. This marked the lowest reading in seven months. There was concern that NFP, one of the most important indicators, would post soft numbers after weak job numbers earlier this week. The ADP Nonfarm Payroll report dropped to 156 thousand, compared to an estimate of 205 thousand and Unemployment Claims jumped to 274 thousand, missing the estimate of 261 thousand. In other releases on Friday, wage levels showed no change, as Average Hourly Earnings posted a weak gain of 0.3%. The unemployment rate remained steady at 5.0%.

The New Zealand dollar posted mixed economic numbers, and is down about 150 points this week. The GDT Price Index, a bi-monthly dairy auction, declined 1.4%. This marked a sharp downturn compared to a gain of 3.8% in the previous reading. Employment numbers were a mix. Employment Change posted a gain of 1.2% in the first quarter, beating the forecast of 0.6%. At the same time, the unemployment rate jumped to 5.7% in March, up from 5.3% a month earlier. The estimate stood at 5.5%. Wage growth remains low and has weighed on inflation levels, which remain well below the central bank’s target of 1% to 3%. The RBNZ has expressed its concern about weak inflation and the strong New Zealand dollar, and lowering interest rates could help address both of these pressing issues.

What can we expect from the Federal Reserve in 2016? In the April policy statement, the Fed didn’t raise rates, but the message to the markets with regard to the US economy was one of cautious optimism. The statement noted continuing improvement in the labor market but added that it was keeping a watchful eye on low inflation levels. Fed policymakers are projecting two or even rate hikes in 2016, and have left the door open to a June hike. With the US releasing key employment numbers on Friday, the markets will be listening closely to the reaction of Fed policymakers, looking for clues regarding the next rate hike.

NZD/USD Fundamentals

Friday (May 6)

  • 8:30 US Average Hourly Earnings. Estimate 0.3%. Actual 0.3%
  • 8:30 US Nonfarm Employment Change. Estimate 203K. Actual 160K
  • 8:30 US Unemployment Rate. Estimate 5.0%. Actual 5.0%

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Friday, May 6, 2016

NZD/USD

NZD/USD May 6 at 9:05 EDT

Open: 0.6887 Low: 0.6808 High: 0.6891 Close: 0.6830

NZD/USD Technicals

S3S2S1R1R2R30.65420.66210.67380.68970.70110.7100
  • NZD/USD has posted losses in the Asian and European sessions
  • There is resistance at 0.6897
  • 0.6738 is providing strong support

Further levels in both directions:

  • Below: 0.6738, 0.6621 and 0.6542
  • Above: 0.6897, 0.7011, 0.7100 and 0.7231
  • Current Range: 0.6738 to 0.6897

OANDA’s Open Positions Ratio

The NZD/USD ratio has shown little movement on Friday. Long positions have a majority (57%), indicative of trader bias towards NZD/USD reversing directions and moving to higher levels.

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