New Zealand dollar continues to hold above US$0.62
Daily Currency Update
The Kiwi dollar is slightly stronger this morning when valued against the Greenback. In Friday's session, the New Zealand dollar (NZD) advanced against the US dollar (USD), trading at a comfortable level of 0.6250, seeing firm gains. The pair may be probably consolidating the last session's losses as strong labor market data may push the Federal Reserve (Fed) to take a less aggressive stance. Meanwhile, markets remain stubborn, betting on earlier rate cuts. The technical indicator 14-day Relative Strength Index (RSI) is positioned above the 50 level, signaling a strong sentiment. This suggests that the NZD/USD pair could approach the 0.6250 major followed by the seven-day Exponential Moving Average (EMA) at 0.6260. A breakthrough above the major level could influence the bulls of the NZD/USD pair to approach the psychological region around 0.6300 level followed by the weekly high at 0.6329 and the major resistance at 0.6350 level. Looking ahead this week on the data front and is fairly quiet with the only notable releases on Wednesday we will see the Australia and New Zealand Banking Group (ANZ) Commodity Price Index and monthly Building Consents on Thursday.Key Movers
The US dollar represented by the dollar Index, is currently trading just above 102.40 with slight losses due to the markets adjusting dovish bets post the release of December’s Nonfarm Payrolls (NFP) and the ISM PMIs. On the labor front, December's Nonfarm Payrolls report outperformed expectations with the creation of 216,000 jobs, significantly higher than the consensus estimate of 170,000 and the previous month's 173,000 jobs. Average Hourly Earnings increased by 0.4% month-on-month, exceeding the forecasted 0.3% and mirroring the previous month's growth rate, while the Unemployment Rate remained unchanged at 3.7%, slightly better than the anticipated 3.8%. Altogether, these events suggest a mixed economic outlook with a slowdown in the services sector potentially balanced by a robust labor market and wage growth. The ISM Services PMI recorded a figure of 50.6, falling short of the expected 52.6 and marking a decline from the previous month's 52.7.From indications in the last 2023 Federal Reserve meeting, a dovish stance was apparent. The Fed expressed comfort with cooling inflation and projected no rate hikes until 2024, suggesting 75 bps of easing. As for now, market predictions hint towards a rate cut in March followed by another in May, and such a position signals a bearish climate for the US dollar, as lower interest rates might drive liquid capital to higher yield markets. As for now the odds of a cut in March have risen to 70%, and the probabilities of an additional cut in May are still high. Looking ahead this week in the US and all eyes will be on the US Consumer Price Index (CPI) which may provide further guidance to investors regarding the next Fed decisions.
Expected Ranges
- NZD/USD: 0.6100 - 0.6300 ▼
- NZD/EUR: 0.5550 - 0.5750 ▼
- GBP/NZD: 2.0100 - 2.0300 ▲
- NZD/AUD: 1.0550 - 1.0750 ▲
- NZD/CAD: 0.8200 - 0.8400 ▼