NZD/USD – New Zealand Dollar Subdued, Employment Reports Next

NZD/USD is almost unchanged on Monday, as the pair trades at the 0.70 line in the North American session. On the release front, it’s a quiet start to the trading week. Today’s highlight is US ISM Manufacturing PMI. The indicator dipped to 50.8 points, within expectations. There are no New Zealand releases on Monday. Tuesday will be data-heavy in New Zealand, starting with the NZ Dairy Auction. This will be followed with key employment numbers, with the release of Employment Change and the unemployment rate.

Last week, the New Zealand central bank held the benchmark interest rate at 2.25%. This followed a surprise cut in March, when the RBNZ lowered rates from 2.50% to 2.25%. Some analysts had expected another cut in the April decision, and the New Zealand dollar jumped 160 points following the rate announcement. Following the announcement, RBNZ Governor Graeme Wheeler stated that the central bank was weighing further easing in order to meet the RBNZ’s inflation target of 1-3 percent. He also noted that the New Zealand dollar is stronger than the RBNZ would like, as the higher New Zealand dollar has weakened the critical export sector. Although a June cut is a strong possibility, lower rates would have a negative effect of raising housing demand and overheating the housing market.

The first quarter of 2016 has been marked by shaky global markets and a sharp drop in oil prices, so slower growth for the US economy was not unexpected. GDP climbed 0.5% in the first quarter, shy of the estimate of 0.7%. This was considerably lower than the 1.4% gain in the fourth quarter of 2015, and marked the weakest quarter of growth in two years. Although economic growth remains moderate, the lukewarm reading will not help the cause of Fed policymakers who favor a rate hike, especially with inflation at low levels. The markets, which were not expecting an April hike, are keeping a close eye on key numbers, looking for clues as to whether the Fed will make a move at its June policy meeting. The April policy statement sounded cautiously optimistic about the US economy, but did not provide any clues about a hike in June.

The US manufacturing sector continues to lag behind the economy’s generally solid performance. Last week, Core Durable Goods dropped 0.2%, well off the estimate of a 0.6% gain. This marked the fourth decline in five months. Durable Goods Orders was stronger at 0.8%, but also missed expectations, as the estimate stood at 1.9%. Recent manufacturing reports, such as the Philly Fed Manufacturing Index have also been soft, as the industry has been hard-hit by weak global demand and a downturn in the US oil industry due to low crude prices. We’ll get a look at the ISM Manufacturing Index later on Monday.

NZD/USD Fundamentals

Monday (May 2)

• 9:45 US Final Manufacturing PMI. Estimate 51.0. Actual 50.8
• 10:00 ISM Manufacturing PMI. Estimate 51.6 points
• 10:00 US Construction Spending. Estimate 0.5%
• 10:00 ISM Manufacturing Prices. Estimate 51.0
• Tentative – US Loan Officer Survey

Upcoming Key Events

Tuesday (May 3)

• Tentative – New Zealand GDT Price Index
• 18:45 New Zealand Employment Change. Estimate 0.6%
• 18:45 New Zealand Unemployment Rate. Estimate 5.5%
• 18:45 New Zealand Labor Cost Index. Estimate 0.3%
• 21:00 New Zealand ANZ Commodity Prices

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Monday, May 2, 2016

NZD/USD May 2 at 9:50 EDT

Open: 0.7002 Low: 0.6987 High: 0.7024 Close: 0.7006

NZD/USD Technical

• NZD/USD has shown limited movement throughout the day
• 0.6897 is providing support
• 0.7011 was tested earlier in resistance and could break in the North American session

Further levels in both directions:

• Below: 0.6897, 0.6738 and 0.6621
• Above: 0.7011, 0.7100, 0.7231 and 0.7322
• Current Range: 0.6897 to 0.7011

OANDA’s Open Positions Ratio

The NZD/USD is showing a slight majority for long positions (53%). This is indicative of trader bias towards NZD/USD breaking out and moving to higher ground.

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.