NZD/USD sticks to daily gains near 0.6330 as attention shifts to US employment data

• Nonfarm payrolls in the United States (US) is expected to rebound to 145K in September.
• US Dollar Index stays in the negative territory ahead of the data.
• Markets are pricing an 86.1% probability of a Federal Reserve rate cut in October.

The NZD/USD pair extended its rebound and touched its highest level since September 25th at 0.6333 on Friday. As of writing, the pair was trading at 0.6329, adding 0.45% on the day.

Increasing rate cut odds weigh on the USD

The broad-based selling pressure surrounding the Greenback this week allowed the pair to stage a decisive recovery. Disappointing Manufacturing and Non-Manufacturing Purchasing Managers’ Index (PMI) data from the United States (US) this week revived concerns over a possible recession and caused investors to start pricing another 25 basis points rate cut by the Federal Reserve in October.

According to the CME Group’s FedWatch Tool, markets see an 86.1% probability of a rate cut this month. Markets will be paying close attention to the labour market data from the US and a disappointing increase in the nonfarm payrolls (NFP) could put the USD under renewed selling pressure and provide a boost to the pair.

Previewing the data,  “We expect nonfarm payrolls to have grown by 100,000 in September, which is below the Bloomberg consensus of 140,000,” said Danske Bank analysts.

“While the non-farm figure tends to be volatile, the employment indices in the Markit PMI and the ISM reports do not look encouraging (and actually signal that jobs growth was even lower than our expectation of 100,000). A weak jobs report will likely add fuel to the repricing of the Fed seen this week.”

US NFP Preview: 10 Major Banks expectations from September payrolls report.

Technical levels to watch for