NZD/USD holds above 0.7000, what’s next?

NZD/USD tracks above the figure level after a brief period below it

Yesterday’s daily close was at 0.7005 and the lows posted today so far was 0.6993. The pair is trading now at 0.7019 as it finds support near the figure level and is trading higher on the day – although it owes much to the dollar retracing some of the gains yesterday.

So, with the pair now pivoting around 0.7000, what comes next?

On the kiwi front, there isn’t any key data left on the week but earlier we had the Q1 labour market report. Although unemployment rate touched a 9-year low, wages data continue to be lackluster.

According to Stats NZ, once you strip out temporary factors that boosted wage pressures from last year, wage inflation was 1.6% y/y which highlights the fact that inflation coming from wage growth is still somewhat missing.

The RBNZ has mentioned that wage growth should be between 1-3%, but preferably on the upper side of that band I would presume in order to stimulate the right kind of inflationary pressures.

The report means the RBNZ will surely stay on hold in next week’s meeting and is expected to continue its rhetoric of staying put just like the RBA. The market is still expecting the RBNZ to move some time in mid-2019 to raise rates.

It’s now down to the dollar side of the equation, with the FOMC coming up later today and the non-farm payrolls report due on Friday. But in the meantime, you can’t rule out any moves in the dollar just like the one we saw yesterday even when there is a lack of data points.

The 0.7000 figure level will be a key support area, followed by the November high @ 0.6980. Failing to hold will open up a move towards 0.6950 and the 76.4/23.6 retracement level @ 0.6936.

As for the upside, it’s a similar case to AUD/USD whereby a break of the 100-hour MA @ 0.7050 will be key in order for buyers to build up some momentum. But before that, there is the 61.8 retracement level @ 0.7032 to get through as well, but I reckon the former will be of higher priority as it is a key near-term level.