NZD/USD – New Zealand Dollar Lower, RBNZ Governor in Focus

NZD/USD has posted considerable losses on Monday, as the pair trades at 0.6770 early in the North American session. On the release front, it’s a quiet start to the week. There are no New Zealand releases on the schedule. In the US, the sole indicator, Labor Markets Conditions Index, posted another decline, coming in at -0.9 points. On Tuesday, the RBNZ will release its Financial Stability Report, which is published twice per year. RBNZ Governor Graeme Wheeler will host a press conference and then testify about the report before a parliamentary committee.

The RBNZ will be on center stage as Tuesday, with the release of the Financial Stability Report and testimony from Governor Graeme Wheeler. The markets will be looking for clues regarding the RBNZ’s monetary policy. Is an interest rate cut imminent? Many analysts say that the central bank could lower rates at its next policy meeting in June. Similar to the RBA, the RBNZ would love to raise inflation and at the same time curb the high-flying kiwi, which has put a dent in the critical export sector. However, housing prices are very high, and a rate cut could increase demand even more and overheat the housing market, which could have negative repercussions on the economy.

Is the US labor market in trouble? Nonfarm Payrolls looked awful 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%.

Will the Federal Reserve raise rates in the near future? In its 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. The Fed appeared to leave the open to a June hike, but the weak payrolls report has greatly reduced the likelihood of a June move. On Friday, New York Fed president William Dudley said he remains confident that the Fed could raise rates as much as twice this year, but many analysts are skeptical if the Fed will raise rates before 2017.

NZD/USD Fundamentals

Monday (May 9)

• 10:00 US Labor Markets Conditions Index. Actual -0.9 points

Tuesday (May 10)

• 17:00 RBNZ Financial Stability Report
• 17:05 RBNZ Governor Graeme Wheeler Speaks
• 21:10 RBNZ Governor Graeme Wheeler Speaks

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Monday, May 9, 2016

NZD/USD May 9 at 9:00 EDT

Open: 0.6840 Low: 0.6764 High: 0.6848 Close: 0.6776

NZD/USD Technical

• NZD/USD was flat in the Asian session and has posted losses in European trade
• There is strong resistance at 0.6897
• 0.6738 is providing weak 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 is unchanged on Monday. Long positions have a majority (57%), indicative of trader bias towards NZD/USD reversing directions and moving to higher levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.