. NZD/USD Gains Ahead of US NFP Data Release - 05 May 2023

NZD/USD Gains Ahead of US NFP Data Release – 05 May 2023

NZD/USD Gains Ahead of US NFP Data Release – 05 May 2023

05 May 2023

NZD/USD Approaches One-Month High Near 0.6300 as US Dollar Prepares for NFP Data.

Introduction:

NZD/USD has maintained its upward trajectory, reaching the highest levels in a month and trading near 0.6310 as the European session approaches. The currency pair has been supported by broad-based weakness in the US Dollar ahead of the eagerly anticipated US Nonfarm Payrolls (NFP) data release. Additionally, the divergence in monetary policy between the Federal Reserve (Fed) and the Reserve Bank of New Zealand (RBNZ) has added to the bullish sentiment.

Fed’s Cautious Approach:

The Federal Reserve has indicated a potential pause in its rate hike trajectory after raising interest rates to their highest level since 2007. Fed Chairman Jerome Powell has expressed caution, suggesting that the current monetary policy is sufficiently restrictive.

Mixed US Data and Rate Cut Speculation:

Preliminary readings of US Nonfarm Productivity and Unit Labor Cost for Q1 2023 revealed mixed results. Nonfarm Productivity declined to -2.7% in Q1, missing market forecasts, while Unit Labor Cost exceeded expectations, rising to 6.3%. The US Goods and Services Trade Balance also showed improvement. However, Initial Jobless Claims increased slightly, and Fed Fund Futures indicate an increasing probability of a rate cut in late 2023.

Key Focus on US Nonfarm Payrolls:

Looking ahead, market participants will closely monitor the release of the key US employment data for April, specifically the Nonfarm Payrolls (NFP) figure. Forecasts suggest a potential decline to 179K compared to the previous figure of 236K. While early signals for the data appear positive, there is a possibility of a downward surprise, which could prompt a retreat in NZD/USD.

Technical Analysis:

From a technical perspective, the NZD/USD bulls need a daily closing above the three-month-old resistance line, around 0.6325, to maintain control of the pair’s momentum.

Conclusion:

NZD/USD has experienced a four-day uptrend, reaching its highest levels since early April. The currency pair has been buoyed by a weakening US Dollar and diverging central bank policies between the Fed and RBNZ. Mixed US economic data and increasing rate cut expectations have also contributed to NZD/USD’s upward momentum.