NZD/USD conquers 0.6400 amidst a risk-off mood, post US NFP report

• NZD/USD is set to finish the week with gains of 2.56%.
• The November US Nonfarm Payrolls suggested a tight labor market, so the Federal Reserve needs to keep hiking rates.
• NZD/USD Price Analysis: Daily close above 0.6400 exacerbates a rally towards 0.6570s.

The New Zealand Dollar (NZD) climbed against the US Dollar (USD) for the fourth consecutive day, spurred by a weaker USD. An upbeat employment report on the United States (US) suggested the Federal Reserve (Fed) might need to keep hiking rates to ease a contracted labor market, though it failed to underpin the US Dollar. Therefore, the NZD/USD is trading at 0.6404, above its opening price by 0.54%.

Wall Street finished the week lower. The US Department of Labor (DoL) revealed that November Nonfarm Payrolls rose 263K above estimates of 200K but trailed October’s data, revised up 284K, adding pressure on the Federal Reserve (Fed). Delving into the data, Average Hourly Earnings rose by 5.1% YoY, up from October’s 4.9%, adding to inflationary pressures, while the Unemployment Rate persisted around 3.7%.

Following the November employment report, the Federal Reserve would need to continue tightening borrowing costs, albeit on 50 bps sizes. In the last monetary policy press conference, Fed Chair Jerome Powell said that the pace of tightening it’s not as important as how high the Federal Funds rate (FFR) needs to be. Some Fed policymakers had forecasted the FFR to end at around 5% to 5.25%.

Federal Reserve’s decision to moderate hikes was justified by an Institute for Supply Management (ISM) Manufacturing PMI report for November. The index dropped to the contractionary territory at 49.0 but also portrayed conditions deteriorating. The data reignited recession fears as the US central bank continues to tighten policy. Indeed, the Federal Reserve is trying to slow the economy, accounting for below-trend growth, as the Fed Chair Powell had said.

Aside from this, an absent New Zealand (NZ) economic docket keeps NZD/USD traders adrift to US Dollar dynamics. It should be said that the Kiwi has rallied on broad US Dollar weakness. On the data front, the NZ Business Confidence report in November fell 14 points to -57.1 compared to October’s reading. Respondents foresee the economy deteriorating over the next year, while some respondents expect their business to shrink in the next 12 months.

NZD/USD Price Analysis: Technical outlook

From a technical perspective, the NZD/USD remains upward biased after surpassing the 200-day Exponential Moving Average (EMA) on Wednesday. Notably, during Friday’s session, the NZD/USD reached a daily low nearby the November 30 high of 0.6399 but bounced off and reclaimed the 0.6400 figure. After the major achieved a daily close above 0.6400, a test of the June 2022 high of 0.6576 is on the cards. The Relative Strength Index (RSI) in overbought territory suggests the NZD/USD might consolidate within the 0.6350-0.6400 range, while the Rate of Change (RoC) confirms that buyers remain in charge.

Therefore, the NZD/USD key resistance levels are the August 12 high of 0.6468, followed by the 0.6500 figure, and the June 2022 high of 0.6575.