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Kiwi tests resistance at 0.7250 amidst weaker US dollar backdrop

NZD - New Zealand Dollar

The New Zealand dollar extended beyond 0.72 US cents overnight, buoyed by a broadly weaker US dollar and sustained strength across commodity prices. The NZD was dragged below 0.7190 through the domestic session, as the local unit was caught up in the AUD downturn and deteriorating AU/China relations. Having touched intraday lows at 0.7185, the NZD climbed steadily through the afternoon and into the northern hemisphere trading day amidst a weaker US dollar backdrop. Investors appear set on consolidating April’s US dollar downturn, extending losses against most majors and allowing the NZD to claw back toward 0.7240. Despite the uptick, the NZD was unable to break resistance at 0.7250 and remains firmly entrenched within recent ranges. Our attentions turn now to US non-farm payrolls. Investors appear resolute in looking through most macroeconomic data sets at present, however a poor print could heighten concerns the US recovery is falling behind schedule, a stark contrast to Wednesday’s strong local labour market performance.

Key Movers

The US dollar tracked lower through trade on Thursday, weaker against most major counterparts, as investors appear to be consolidating April’s downturn. The DXY index fell 0.4% through the overnight session, slipping below 91 to touch lows at 90.89. US dollar softness helped the euro climb off lows near 1.20 and push back through 1.2050, while the Great British pound’s strong start to the month faltered following the Bank of England policy meeting. Policy makers opted to maintain the current interest rate setting, while reducing the size and scope of the weekly bond buying program. The decision was largely expected as the Bank aims to roll back bond purchases with a view to ending QE in December. The BoE raised forecast for GDP performance and lowered their expectations for unemployment, as the outlook and recovery across the British economy appears to be ahead of schedule. Despite the optimistic outlook, Governor Bailey quickly doused the embers of expectation, highlighting that even the Bank’s most optimistic forecasts still show the UK economy will lose two years of GDP growth because of the pandemic. Having slipped below 1.39, sterling touched lows at 1.3866 before creeping marginally higher into this morning’s open.

Attentions turn now to the Non-farm payroll data as the headline item leading into the weekly close

Expected Ranges

NZD/USD: 0.7150 - 0.7280 ▲

NZD/EUR: 0.5930 - 0.6030 ▼

GBP/NZD: 1.9080 - 1.9330 ▼

NZD/AUD: 0.9250 - 0.9330 ▼

NZD/CAD: 0.8750 - 0.8870 ▼