Nzdusd drops as US economic data influences currency markets

NZDUSD Analysis

Performance after Tuesday
Period	Pct	Chg	Momentum
Tuesday	-0.84%	-49.2 Pips
Week to-date	-1.81%	-107.2 Pips
December	-1.65%	-97.1 Pips

Upcoming key events (London Time)

Wed 01:30 PM USD CPI Inflation Rate (12-mth)
Thu 01:30 PM USD PPI excluding Food and Energy sectors (12-mth)

What happened lately

In the United States, the Bureau of Labor Statistics reported a decrease in Unit Labor Costs for the third quarter, showing a reduction to 0.8% from the previous quarter’s 1.9%. This decline indicates that the growth in compensation paid to employees is slowing in relation to output. At the same time, U.S. Nonfarm Business Labor Productivity remained unchanged from the last quarter, standing at 2.2% for Q3. This stability in productivity suggests that output is keeping pace with labor input, an indication that businesses are managing resources efficiently without increased pressure on labor costs.

The recent economic data from the United States showing a decline in unit labor costs might suggest reduced inflationary pressures in the economy, as businesses are not experiencing rising costs that would necessitate price increases to maintain profit margins. This can be interpreted as a positive indication for the U.S. economy, which could strengthen the U.S. dollar. However, the upcoming reports on the U.S. CPI Inflation Rate and the PPI excluding Food and Energy sectors will be closely watched to get a broader overview of inflationary trends. High-impact results from these reports could significantly influence market sentiment and currency valuations.

Regarding the NZDUSD currency pair, the New Zealand Dollar experienced a decline, dropping by 0.84% to 0.57994 against the U.S. Dollar. This can be partly attributed to the economic indicators released from the United States, which signal a reduction in labor costs, acting favorably towards the value of the U.S. dollar. With the U.S. maintaining steady productivity, it suggests resilience in the economy, possibly leading to a stronger greenback. Consequently, this might place further downward pressure on the NZDUSD pair, especially if forthcoming U.S. inflation data signals robustness in economic growth or a hawkish stance by the Federal Reserve. Market players will be particularly attentive to the high-impact U.S. inflation data set for release, as unexpected outcomes could further influence trading strategies and investor confidence in the currency markets.

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What can we expect from NZDUSD today?

NZDUSD on Tuesday dropped -0.84% to 0.57994. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for NZDUSD looks bearish as the pair posted lower in Tuesday trading session.

Looking ahead for the day, immediate support level is at S1 0.57739 with break below could see further selling pressure towards S2 at 0.57485. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 0.58590 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 0.57910 would indicate selling pressure.

For the week to-date, take note that NZDUSD is mixed as compared to the prior week.

Key levels to watch out:

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