New Zealand Dollar advances as US labor market weakness pressures the USD

• NZD/USD gains after a much weaker-than-expected US employment report.
• Sharp downward revisions to previous payrolls reinforce expectations of a more accommodative Fed.
• The Reserve Bank of New Zealand's hawkish stance continues to support the New Zealand Dollar.

NZD/USD trades around 0.5890 on Friday at the time of writing, up 0.36% on the day. The pair is benefiting from a sharp decline in the US Dollar (USD) following a much weaker-than-expected US employment report, while the Reserve Bank of New Zealand's (RBNZ) hawkish stance continues to support the New Zealand Dollar (NZD).

Data released by the Bureau of Labor Statistics (BLS) showed that US Nonfarm Payrolls (NFP) fell by 23K in July, compared with market expectations for an increase of 80K jobs. Previous months were also revised sharply lower, with June payrolls revised down from 57K to 20K and May from 129K to 63K, resulting in a combined downward revision of 103K jobs.

The Unemployment Rate edged down to 4.1% from 4.2%, while the annual Average Hourly Earnings growth slowed to 3.2% from a revised 3.4%, reinforcing evidence that the US labor market is gradually cooling.

The US Dollar weakens sharply as investors scale back expectations of further monetary tightening by the Federal Reserve (Fed). According to the CME FedWatch Tool, the chance of a 25-basis-point rate hike in September has fallen to 42%, down from 55% a day earlier and 67% a week ago.

Comments from Richmond Fed President Thomas Barkin, however, helped temper the most pessimistic interpretations of the report. Barkin said the latest employment figures reflect a labor market characterized by low hiring and low firing rather than a significant deterioration, while noting that corporate earnings remain strong.

Meanwhile, the New York Fed Survey of Consumer Expectations showed that one-year inflation expectations eased to 3.6% in July from 3.7% in June, while three-year and five-year expectations remained unchanged. The survey reinforces the view that inflationary pressures continue to moderate gradually, adding further pressure on the US Dollar.

The New Zealand Dollar also continues to benefit from the RBNZ's hawkish bias, with the central bank's monetary policy stance providing additional support for the Kiwi against a broadly weaker US Dollar.

NZD/USD technical analysis

In the one-hour chart, NZD/USD trades at 0.5890, holding a constructive near-term bullish bias after reclaiming the downtrend resistance line, now offering a support level around 0.5884. The pair trades above both the 100-period and 200-period moving averages at 0.5876 and 0.5854 respectively, which together suggest an improving underlying trend structure. Momentum supports the topside bias, with the Relative Strength Index (RSI) hovering near 61, indicating firm bullish pressure but still shy of overbought territory.

On the downside, initial support is seen at the reclaimed trend-line area near 0.5884, followed by the 100-period moving average at 0.5876 and a more solid horizontal floor at 0.5860, while the 200-period moving average at 0.5854 marks a deeper structural cushion. On the topside, the next key obstacle emerges at the horizontal resistance level of 0.5909, and a clear hourly close above this barrier would likely open the path for a continuation of the recovery, while failure to do so could trigger a corrective pullback toward the nearby support cluster.

(The technical analysis of this story was written with the help of an AI tool. Know more.)