The New Zealand Dollar (NZD) appreciated by 0.16% to around 0.5860 against the US Dollar (USD) during the European trading session on Thursday, driven by the US Dollar's underperformance amid disappointing US employment data [1]. The US Dollar Index (DXY) fell 0.3% to near 99.26, reflecting broader weakness in the Greenback [1]. On Wednesday, the US ADP reported that the private sector created only 38,000 jobs in August, missing estimates of 47,000 and falling short of the previous release of 46,000 [1]. This weak private employment data has set an unfavorable backdrop for the upcoming US Nonfarm Payrolls (NFP) report for August, scheduled for Friday [1].
TD Securities expects the US labor market to show signs of stabilization, forecasting a rebound in August NFP to 95,000 after July's decline of 23,000. However, this is seen as a recovery from prior weakness rather than the start of a stronger hiring trend. The unemployment rate is anticipated to remain steady at 4.1%, with balanced risks, indicating a broadly stable jobs picture [1]. Additionally, comments from New York Fed Bank President John Williams that "inflation expectations are contained" and "recent data on price pressures has been encouraging" have increased doubts over upside inflation risks [1].
On the New Zealand side, market participants are skeptical about the Reserve Bank of New Zealand (RBNZ) raising interest rates in the next policy meeting after hiking them to 2.75% on Wednesday [1]. Analysts at MUFG/BTMU note that RBNZ Governor Anna Breman adopted a cautious tone, stating that further increases in the Official Cash Rate (OCR) are likely but the timing is highly uncertain, as the effects of recent hikes and new information are being considered for the medium-term inflation outlook. This measured guidance has impacted market pricing, with the probability of another hike in October falling to around 36%, down from 65% prior to the meeting [1].
Technical analysis shows NZD/USD trading at 0.5863, below the 20-period Exponential Moving Average (EMA) at 0.5898, maintaining a near-term bearish bias despite a broader recovery from the 0.56 area in recent weeks. The pair has slipped below the former rising trend-line support, now a barrier at 0.5924, suggesting the latest pullback is eroding the bullish structure. The Relative Strength Index (RSI) at 45.3 is drifting toward neutral, indicating fading upside momentum [1].
CONCLUSION
The New Zealand Dollar's gains are primarily attributed to weak US employment data and a cautious outlook from the RBNZ. While the NZD/USD pair has seen a short-term boost, technical indicators suggest limited upside momentum. Market participants remain watchful for the upcoming US NFP report and further signals from central banks.