New Zealand Dollar softens below 0.5900 after Unemployment Rate rises to decade high
- NZD/USD softens to around 0.5875 in Wednesday’s early Asian session.
- New Zealand’s Unemployment Rate climbs to a decade-high of 5.6% in Q2.
- Qatar signals progress on a US-Iran deal.
The NZD/USD pair loses momentum to near 0.5875 during the early Asian trading hours on Wednesday. The New Zealand Dollar (NZD) weakens against the US Dollar (USD) following the employment report. Traders brace for the release of China’s RatingDog Services Purchasing Managers Index (PMI) data for fresh impetus.
Data released by Statistics New Zealand on Wednesday showed that New Zealand's Unemployment Rate climbed to a decade-high of 5.6% in the June quarter. This figure was 5.3% in the first quarter (Q1), above the market consensus of 5.4%.
Meanwhile, New Zealand’s Employment Change rose 0.5% in Q2, up from 0.2% in Q1, compared with the expectations of 0.2%. The participation rate in New Zealand jumped to 70.7% in Q2, versus 70.4% prior. The Kiwi attracts some sellers in an immediate reaction to the spike in New Zealand’s jobless rate.
The prospect of an interim deal to reopen the Strait of Hormuz could prompt traders to pare bets on further Federal Reserve (Fed) interest rate increases. This, in turn, could drag the Greenback lower and create a tailwind for the pair. Qatar said on Tuesday that a proposal had been drafted, and both the US and Iran sounded hopeful about an agreement to reopen the crucial waterway, per Bloomberg.
Markets seen overstating RBNZ tightening as ING leans toward September hike
Analysts at ING reiterate their preference for a Reserve Bank of New Zealand move later in the year, noting that “we have long favoured a hike in either September or October, but our conviction around a September move has increased recently.” They argue that the shift in timing reflects a view that “markets may be overstating the scale of the tightening cycle, with 75bp priced in by February,” suggesting investors could be ahead of themselves on how far the RBNZ is likely to go.
Technical Analysis: NZD/USD maintains constructive outlook in daily chart
In the daily chart, NZD/USD The pair holds above both the 20-period Bollinger middle band and the 100-day moving average (MA), which collectively underpin a bullish near-term bias as price grinds higher within the upper half of the Bollinger envelope. The Relative Strength Index (14) at 63.8 stays in constructive territory, hinting that buying pressure remains dominant but is edging closer to overbought conditions.
On the topside, initial resistance emerges at the 20-period Bollinger upper band near 0.5910, where bulls could pause or consolidate on a first test. On the downside, immediate support is located at the 100-day MA around 0.5820, followed by the Bollinger middle band at 0.5810, while a deeper retracement would likely look toward the Bollinger lower band near 0.5715 as a more distant structural floor.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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