NZD/USD – Steady After Hawkish RNBZ Report

NZD/USD is steady on Wednesday, trading at 0.6560 early in the North American session. In economic news, US NFIB Small Business Index met expectations, while Import Prices disappointed with a fifth straight decline. In New Zealand, the central bank released its biannual Financial Stability report, which eased concerns about an imminent rate cut. On Thursday, we’ll get a look at US Unemployment Claims. As well, Federal Reserve head Janet Yellen speaks at event in Washington.

The New Zealand dollar has been struggling, as the currency surrendered 250 points against the US dollar, its worst weekly showing since January. With the economy showing some weakness, there has been pressure on the RBNZ to reduce interest rates in order to bolster the economy. The central bank did not adjust interest rates in October, leaving the benchmark rate at 2.75%. The central bank released its Financial Stability Report on Tuesday, and was quite transparent that a rate cut in December was unlikely, stating “there is less scope for monetary policy easing to offset a sharp rise in funding spreads.” At the same time, the report expressed concerns about the stability of the housing and dairy sectors, two key areas of the economy. High interest rates will buffer the kiwi to an extent, but the currency will be hard pressed to hold its own against the flying US dollar, especially if next week’s key releases, led by Retail Sales, miss expectations.

The US dollar posted broad gains late last week, following the strong NFP reading, which crushed the estimate and increased the likelihood of a rate hike by the Federal Reserve in December hike. Still, traders should keep in mind that the Fed has been split over a rate hike, and many members will be hesitant to vote in favor of raising rates unless they are confident that the US economy can withstand an interest rate hike. Employment numbers out of the US have certainly improved, with recent indicators such as the unemployment rate pointing to close to full employment in the US economy. At the same time, other indicators have not fared as well, particularly manufacturing data and inflation levels. While a rate hike in December is again on the table, it is by no means a done deal, making for plenty of speculation on the part of markets players in the next several weeks as to the Federal Reserve’s monetary plans.

With the stellar performance by US Nonfarm Payrolls, the markets will be looking for more good news from US employment numbers. Strong job numbers not only point to a solid US economy, but will increase the likelihood of a rate increase in December, an event which would likely send the greenback to higher levels against its rivals. We’ll get a look at unemployment claims on Thursday, with the key indicator expected to drop to 270 thousand. Although last week’s reading of 276 thousand was higher than expected, the four-week indicator, which is less volatile than the weekly measurement, remains at its lowest level since December 1973. A strong reading from unemployment claims could bolster the US dollar.

NZD/USD Fundamentals

Wednesday (Nov. 11)

• There are no releases on Wednesday

Upcoming Key Releases

Thursday (Nov. 12)

• 13:30 US Unemployment Claims. Estimate 270K
• 14:30 Federal Reserve Chair Janet Yellen Speaks
  

*Key releases are highlighted in bold

*All release times are GMT

NZD/USD for Wednesday, November 11, 2015

NZD/USD November 11 at 14:15 GMT

NZD/USD 0.6567 H: 0.6588 L: 0.6499

NZD/USD Technical

• NZD/USD moved higher in the Asian session, but retracted in the European session, giving up much of these gains. NZD/USD is showing limited movement early in North American trade.
• 0.6605 is providing weak resistance.
• 0.6449 is the next support line.
• Current range: 0.6449 to 0.6605

Further levels in both directions:

• Below: 0.6449, 0.6368 and 0.6233
• Above: 0.6605, 0.6738 and 0.6897

OANDA’s Open Positions Ratio

NZD/USD ratio is unchanged, consistent with the lack of movement shown by the pair. NZD/USD remains close to a split between long and short positions, indicative of a lack of trader bias as to what direction the pair will take next.

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.