NZD/USD surges to three-day highs on weak US labor data, Chinese stimulus

• NZD/USD rallies to 0.5945, reversing from yearly lows, as US Job Openings fall short of expectations, reducing odds of a Fed rate hike in September.
• Conference Board data shows declining Consumer Confidence and rising inflation expectations, adding pressure on the US Dollar.
• Chinese authorities’ commitment to economic stimulus boosts the Antipodean currency as traders pare back bets on Fed tightening, reflected in CME FedWatch Tool odds dropping to 86.5%.

The New Zealand Dollar (NZD) rallied sharply against the US Dollar (USD) after weaker-than-expected labor market data, which could warrant the Fed to keep rates unchanged at the next meeting. Alongside Chinese authorities’ compromise to spur economic stimulus in the country bolstered the Antipodean. The NZD/USD is trading at 0.5945, at new three-day highs, after testing yearly lows of 0.5886.

Kiwi Dollar gains as US JOLTs and Consumer Confidence miss estimates; less hawkish Fed expected

Given the remarks of the Federal Reserve Chair Jerome Powell that a tight labor market and the economy growing above trend could warrant further tightening, today’s jobs report, and increased expectations, the Fed might refrain from lifting rates in September.

The US Bureau of Labor Statistics (BLS) revealed that Job Openings declined from 9.165 M in June to 8.827 M in July and beneath estimates of 9.465M. That said, traders’ focus shifts to Friday’s US Nonfarm Payrolls report, with estimates of 170K jobs added to the economy, below the prior month’s 187K, which would mark back-to-back reports with lower readings than estimates.

In other data, the Conference Board (CB) showed Consumer Confidence is decaying, as exhibited by August data coming at 106.1, below July’s 114, and forecasts of 116. Dana Peterson, the chief economist at the Conference Board, said, “Consumers were once again preoccupied with rising prices in general and for groceries and gasoline in particular.”

The report highlighted that inflation expectations for a year ahead jumped to 5.8%. The CB poll showed Americans are confident about finding a job, which shows the labor market is beginning to feel the pain of 525 basis points of tightening by the Fed.

Following the data, the NZD/USD extended its gains past the 0.5900 figure, extending towards its daily high of 0.5956. The Greenback dropped sharply below the 104.000 mark, down 0.30% at 103.664, as traders pared bets the Fed would continue to lift rates. Reflection of that is the CME FedWatch Tool showing for keeping rates at 5.25%-5.50%, at 86.5%, from 78% a day ago.

In the meantime, during the Asian session, China revealed its commitment to strengthen policy support, speed up government spending, and boost the weaker economic recovery achieved so far during the year.

NZD/USD Price Analysis: Technical outlook

The pair remains downward biased, although it’s printing a leg-up from YTD lows. For buyers to resume their uptrend, they must reclaim the last higher-high at 0.5985, which could pave the way for further NZD/USD upside. Failure to do so could exacerbate a continuation of the downtrend, eyeing the YTD low of 0.5886, followed by the November 10 low of 0.5840.