- NZD/USD stabilizes after the heaviest drop in three weeks near one-month bottom.
- Strong US data, Fed’s tapering signals buoyed greenback.
- Risk-off mood adds to the downside pressure on Antipodeans.
- US NFP is the key as ADP, ISM Services PMI backed reflation fears.
NZD/USD sellers take a breather around 0.7150, following a sharp daily selloff to a monthly low, amid a quiet Asian session start on Friday. The kiwi pair slumped the most since May 12 on a double whammy of broad US dollar rally and bearish equity markets the previous day. However, the pre-NFP caution and light calendar seem to offer a pause to further downside.
US data, Fed and equities all point in one direction…
US ADP Employment Change and ISM Services PMI for May joined the second-tier job figures for Q1 2021 and weekly Jobless Claims to propel the odds of heating inflation on Thursday. While the ADP jumped to 972K, well beyond the 650K forecast and 654K prior, Q1 Unit Labor Costs, Nonfarm Productivity and Weekly Jobless Claims pin-point a strong NFP for May, expected 664K versus 266K. Given the strong employment figures favoring the reflation risk and push the Fed towards tapering, market players put a safe-haven bid under the US dollar.
ISM Services PMI also jumped the most on record with 64.00 figures versus 63.00 expected and 62.7 previous readouts. The data adds to the US Dollar Index (DXY) run-up as escalating services activities in the US hint towards a strong price pressure in the world’s largest economy and the need for Fed’s policy adjustments.
Additionally, the US Federal Reserve (Fed) also shed undercover help to employment markets, via a gradual reduction in the portfolio sales, which in turn buoyed talks of Fed tapering and pleased the greenback bulls.
While the US dollar run-up is a major force behind the NZD/USD slump, it’s not the only one in the army. The reason could be spotted to the downbeat equities after stronger signals of Fed tapering battled clues that US President Joe Biden is ready to ease his demand of corporate tax from 25% to 18%. Furthermore, RBNZ chatters trying to tame the rate hike woes and recently mixed data add to the Kiwi pair’s dismal.
Looking forward, markets are likely to repeat the pre-NFP trading lull amid a light calendar. However, comments from the Fed Chair will offer intermediate moves to the NZD/USD traders, mostly downside.
NZD/USD bears cheer a clear downside break of monthly and two-month-old support lines, not to forget 50-day and 100-day SMA breakdown, amid downbeat MACD. Hence, a fall to the 0.7100 threshold, also comprising multiple lows since mid-January, can’t be ruled out. Meanwhile, 50-day SMA and previous support line from May 04 guard consolidation of recent losses around 0.7170.