The New Zealand Dollar is trading lower on Friday as investors position themselves ahead of the release of the U.S. Non-Farm Payrolls report at 12:30 GMT. For nearly three weeks, the Kiwi has benefited from a weaker U.S. Dollar as investors priced in as much as a 50 basis point rate cut by the Fed at the end of July. This, after the Reserve Bank of New Zealand cut rates a quarter-point in June and said it could cut again in August.
At 05:44 GMT, the NZD/USD is trading .6679, down 0.0009 or -0.13%.
On Friday, the U.S. Non-Farm Payrolls report is expected to show the economy added 162K jobs in June. The unemployment rate is expected to remain at 3.6%. Average Hourly Earnings are expected to grow by 0.3%.
A steady to slightly lower headline number will likely mean the Fed cuts 25 basis points. This could put pressure on the NZD/USD since it’s been priced in. A huge miss to the downside will likely put a 50 basis point cut back on the table. If the Fed cuts, the RBNZ is also likely to cut in August. Otherwise, the New Zealand Dollar could get too strong and this could hurt exports.
The main trend is up according to the daily swing chart, however, momentum shifted to the downside with the formation of the closing price reversal top at .6727 on July 1. Furthermore, a secondary lower top may be forming at .6720. This will also indicate that the selling is getting stronger.
A trade through .6656 will change the main trend to down. A move through .6727 will negate the closing price reversal top and signal a resumption of the uptrend.
The main range is .6939 to .6481. Its retracement zone at .6710 to .6764 is acting like resistance.
The intermediate range is .6784 to .7481. Its retracement zone at .6669 to .6633 is providing support.
The short-term range is .6487 to .6727. If the main trend changes to down then look for a break into its retracement zone at .6607 to .6579.
Based on the early price action, the direction of the NZD/USD on Friday is likely to be determined by trader reaction to the intermediate Fibonacci level at .6669.
A sustained move over .6669 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the main 50% level at .6710. Overtaking the minor top at .6720 and the main top at .6727 will indicate the buying is getting stronger with the next target the main Fibonacci level at .6764.
A sustained move under .6669 will signal the presence of sellers. Taking out .6656 could trigger an acceleration to the downside with the next target the intermediate 50% level at .6633.
If .6633 fails as support then look for the selling to possibly extend into the short-term retracement zone at .6607 to .6579.