NZD/USD eyes a break above the 50-DMA, as the NZD registers gains despite upbeat US data

• The NZD clings to gains as one of the G8 currencies posting gains vs. the USD.
• Data from the United States underpinned the US Dollar, as manufacturing activity is a tough nut to crack.
• New Zealand’s Building Permits surprisingly rose after August’s fall.

The NZD/USD rises in the North American session but remains off the daily highs above 0.5900, as a report showed that manufacturing activity in the US, albeit slowing, the economy is at expansion, a headwind for the NZD. Nevertheless, a possible review of China’s Covid-19 restrictions and an RBA rate hike kept the safe-haven USD in check. The NZD/USD is trading at 0.5839, above its opening price by almost 0.50%.

Sentiment remains negative, as shown by US equities trading with losses. As traders brace for the US Federal Reserve November monetary policy decision, a tranche of US economic data keeps the greenback climbing.

Data-wise, the Institute for Supply Management reported that the manufacturing PMI for October grew by 50.2, above 50 estimates and lower than September’s 50.9. Earlier, S&P Global issued the PMI for the US, which also expanded at a 50.4 pace, above calculations of 49.9, meaning that the US economy is about to hit a recession.

At the same time as the release of ISM data, the Department of Labor reported that job openings increased. September JOLTS data showed vacancies increased by 10.717M above 10M estimates, smashing August’s 10.28M.

Given that US data crushed the forecasts, expectations for further Fed tightening augmented demand for the US Dollar, in part by US Treasury yields, namely the 10-year, jumping above the 4% threshold.

The NZD/USD pair dwindled from 0.5880 and reached a daily low at 0.5828 before retracing and hovering around the R1 daily pivot at 0.5840.

It should be noted that Reuters reported that the White House economic advisos Bernstein said that Biden endorsed the Fed pivot, which was perceived as a dovish signal, sending the NZD/USD towards t0.5870. But later, it was corrected, and the economic advisor to the White House meant that Biden endorsed the Fed pivot to tighten policy, so the NZD/USD erased those gains.

Elsewhere, New Zealand data reported during the Asian session helped the NZD to strengthen against the USD. Building Permits for September rose by 3.8% MoM vs. a 1.6% contraction in August, reported Statistics New Zealand. Furthermore, under review China’s Covid-19 restriction policy and the Reserve Bank of Australia’s (RBA) 0.25% rate hike gave an additional leg-up to the NZD/USD, rallying from 0.58010 to 0.5909.

What to watch

The New Zealand economic calendar would be busy, revealing the Reserve Bank of New Zealand (RBNZD) Financial Stability Report. Additionally, Employment data for Q3, namely Employment Chance, Labor Costs Index, participation Rate, and an RBNZ Press Conference, would be catalysts that can underpin the New Zealand Dollar.

On the US front, the calendar will feature the ADP Employment Change, a prelude for Friday’s Nonfarm Payrolls, alongside the Federal Reserve monetary policy decision and Jerome Powell press conference.

NZD/USD Key Technical Levels