New Zealand Dollar, Q2 Jobs Report, NZD/USD, Covid - Talking Points
- New Zealand Dollar gains amid a stellar second-quarter jobs report
- China PMI figures move into focus for the Australian Dollar during APAC trade
- NZD/USD appears to be resuming a nearly failed wedge breakout
Wednesday’s Asia-Pacific Outlook
The New Zealand Dollar gained overnight as markets gyrated back into risk assets. Kiwi Dollar strength appears to be holding firm into the trading day after New Zealand announced its second-quarter jobs report. On a quarter-over-quarter basis, employment rose 1.0%. That is well above the 0.7% forecasted figure, according to a Bloomberg survey. Moreover, the unemployment rate crossed the wires at 4.0% versus the 4.4% expected figure.
The upbeat data is likely fueling hawkish bets for the Reserve Bank of New Zealand. The RBNZ will meet in about two weeks on August 18, where overnight index swaps are pricing in a 25-basis point rate hike according to Bloomberg. That makes sense considering the latest rounds of stellar employment data and high inflation figures, which have made substantial progress since the pandemic-induced recession.
Elsewhere, Wall Street closed higher, fueled by upbeat earnings. The benchmark S&P 500 index led stocks higher, gaining 0.82% on the day. Rising Covid cases, driven by the highly transmissible Delta variant, are weighing on sentiment. Wide-spread lockdowns in the United States are seen as unlikely, which may help market mood stay afloat despite a pickup in cases.
Meanwhile, the risk-sensitive Australian Dollar is also pointing higher. Yesterday’s, the Reserve Bank of Australia (RBA) kept its plan to reduce weekly asset purchases untouched. Some expected the central bank to possibly suspend that plan given recent lockdowns across the country. That fueled some upside in the Aussie Dollar, which is now facing Caixin Chinese PMI data during Wednesday’s Asia-Pacific trading session.
NZD/USD Technical Outlook:
NZD/USD rose overnight and is quickly approaching its falling 50-day Simple Moving Average (SMA), which may provide substantial near-term resistance. The currency pair is on the rise after retesting a prior resistance trendline that formed the upper bound of a Descending Wedge. That said, upside movement may continue from here. Alternatively, a drop lower could see prices fall back to the wedge’s upper limit. Overall, the nearly failed wedge breakout appears to be back in play.
NZD/USD Daily Chart
Chart created with TradingView
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--- Written by Thomas Westwater, Analyst for DailyFX.com
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