NZD/USD holding firm on 0.68 handle ahead of key labour market data

• NZD/USD has been in consolidation for the most part overnight, bouncing off 0.68 the figure.
• Markets traded with an upbeat tone overnight due the reported progress in NAFTA talks on motor vehicles and a detente in US/China trade tensions.
• Traders await the NZ Q2 Labour Market Statistics ahead of Australian and Chinese PMIs for July.

NZD/USD has been in consolidation for the most part overnight but did succumb to the dollar’s positive trade war headlines borne spike which took 0.68 the figure. However, the pair has recovered and gained 24 pips into the close as traders await the NZ Q2 Labour Market Statistics ahead of Australian and Chinese PMIs for July. Currently, NZD/USD is trading at 0.6816 and tucked in just below the 21-he SMA at 0.6818.

Markets traded with an upbeat tone overnight due the reported progress in NAFTA talks on motor vehicles and a detente in US/China trade tensions. Bloomberg came with a report that U.S. and China seek to restart talks to defuse a trade war, citing sources. This boosted risk and North American equities saw moderate gains (SPX: 0.5%).  

Meanwhile, NZD/USD has found a footing on the 0.68 handle having recovered from the 0.6760 lows on 27th July as the dollar gives back some ground following the GDP miss last week, (despite being a strong number). However, as analysts at ANZ Bank New Zealand Limited, (ANZ), explained, domestic factors are not the main driver at present:  

“Weak business sentiment is a reminder that the NZ economy is far from healthy, making it difficult to get too upbeat on the NZD’s outlook right here. That said, with the USD looking close to fully priced, it is not clear that the kiwi is going to head dramatically south either.”

Key New Zealand data preview:

Analysts at TD Securities explained that employment is expanding at a breakneck pace as businesses claim skilled/unskilled labour are difficult to find. “We look for a +0.4%/q expansion in employment (mkt +0.5%) lowering the unemployment rate to 4.2% (mkt 4.4%). We expect the participation rate to ease to 70.5%, spurred by the cooling in migration levels, hence our lower u-rate forecast. The 4.8%/q jump in the minimum wage (from 1 Apr) is set to fuel wage growth to 2.2%/y (q/q +0.8%/q cf mkt +0.7%/q).”

NZD/USD levels

Below the 0.68 handle, key support is located at 0.6720 and resistance remains located at 0.6860. Bulls are now looking to sustain a meaningful bid away from the 10 and 21-D SMAs converging around 0.6780 and is using the 0.68 figure as a support.  RSI has started to drift higher into  a more  positive  territory.  A break of 0.6920, the June highs, will come into focus on a follow through beyond 0.6860. The 200-month moving average resistance at 0.7009 is the next key level while a break to the downside below the 10 and 21-D SMAs opens 0.6720 and then 0.6680.