NZD/USD tumbles on risk aversion on increased recessionary fears in the US

• Surging jobless claims sparked concern among traders and boosted the US Dollar to the detriment of the New Zealand Dollar.
• Bullard warns of sticky inflation, says Fed needs to stay vigilant to reach 2% target
• After the RBNZ 50 bps rate hike, the New Zealand Dollar rally faded as the NZD/USD dropped below the 200-DMA.

NZD/USD stumbles below the 200-day Exponential Moving Average (EMA) due to a risk aversion as the United States (US) labor market data crumble, sparking recessionary fears. Therefore, investors seeking safety in the FX space bought the US Dollar (USD). At the time of writing, the NZD/USD is exchanging hands at 0.6255., down almost 1%.

NZD/USD creeps below the 200-DMA, following bad US jobs data

Wall Street’s shift from being in the red turning positive. US economic data revealed that the labor market begins to loosen up as the Federal Reserve (Fed) maintains its hiking campaign. However, unemployment claims rising above estimates of 200K to 228K for the week ending on April 1 spurred speculations that a Fed pivot might be around the corner.

Earlier in the week, the JOLTs report flashed that job openings have begun to downtrend, while the latest ADP report showed that private hiring was below forecasts. Therefore, money market futures trimmed the chances for a 25 bps rate hike by the Federal Reserve, with traders estimating rates to be kept unchanged at the upcoming Fed meeting, according to CME FedWatch Tool.

The odds of keeping rates at 4.75%-5.00% are 56.1%. In addition, some investors speculate that the Fed could cut rates as soon as July.

The US Dollar Index (DXY), which tracks the performance of six currencies against the American Dollar (USD), registers minuscule losses of 0.08%, down at 101.802, after reaching a two-day high at 102.138. US Treasury bond yields resumed their downward trajectory, a headwind for the greenback.

Lately, the St. Louis Federal Reserve President James Bullard said that Q1’s incoming data is more robust than expected, adding that financial conditions are less tighter than the 2007-2009 crisis. Bullard said inflation would be “sticky going forward” and that the Fed “needs to stay at it” to get inflation back to its 2% target.

On the New Zealand (NZ) front, the rally sparked by the Reserve Bank of New Zealand’s (RBNZ) 50 bps rate hike at the April 5 meeting was short-lived, as the NZD/USD turned bearish, below the 200-day EMA, which lies at 0.6268. ANZ analysts are expecting an additional 25 bps rate hike. They added, “We’ve updated our OCR call, banking the 25bp surprise in April and maintaining our expectation for a 25bp follow-up in May (which will take the OCR to a peak of 5.5%). We’ve also penciled in three cuts for late 2024.”

NZD/USD Technical Analysis