NZD/USD: Firmer around three-month high near 0.7150 on USD weakness, risk-on mood
- NZD/USD kick-starts the week on a firmer footing after two-week uptrend to multi-day high.
- US jobs report strengthen concerns over delayed Fed tapering, ISM data raise fears of stagflation.
- Market sentiment improves with additional support of no new covid cases outside Auckland, Wellington.
- Announcement on alert level easing outside Auckland will be important amid a light calendar and US holiday.
NZD/USD begins the week’s trading while keeping the two-week-old upside momentum, not to forget a six-day north-run, around 0.7150.
Despite the coronavirus shock at home, which receded of late, NZD/USD managed to cheer the US dollar weakness and broadly positive sentiment during the last few days, recently bolstered by US jobs reports and virus conditions at home. However, the government announcement on the virus-led alert level outside capital will be the key today.
The US employment report for August showed the headline figure Nonfarm Payrolls as quite disappointing, 235K versus 750K expected. The Unemployment Rate dropped to 5.2% from 5.4% and the Participation Rate remained unchanged at 61.7%. The downbeat figures propel chatters that the Federal Reserve (Fed) will have to wait before announcing the taper.
It should be noted that the ISM Services PMI for August dropped to 61.7 versus 64.1 previous reading with the business activity sub-index marking the sharpest fall from 67 to 60.1. These numbers raised concerns that the US may witness a period of stagflation and the same troubled the US Dollar Index (DXY).
Elsewhere, virus conditions are mixed as New Zealand (NZ) reports no new cases during the weekend but the West and Australia don’t show promising signs. NZ Prime Minister Jacinda Ardern will announce activity restriction guidelines for the nation outside Auckland. While the alert level in the capital will remain unchanged at level 4, chatters that some easing will be offered from the current level 3 ex-Auckland position. “The government will today decide if restrictions will be loosened for regions outside of Auckland. No cases linked to the current outbreak have so far been detected outside Auckland or Wellington,” said NZ Herald.
Other than the NZ government decision, New Zealand’s ANZ Commodity Price Index for August, prior -1.4%, will be important to watch. It’s worth noting that the US markets are off today and may result in a dull Monday afterward.
Technical analysis
A downward sloping trend line from late February, around 0.7150, becomes the key hurdle to NZD/USD upside targeting May monthly peak near 0.7315–20. However, bulls remain hopeful unless staying above the 200-DMA level of 0.7117.