Nzdusd drops as U.S. labor costs rise and productivity decreases

NZDUSD Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	-0.18%	-10.2 Pips
Week to-date	1.83%	102 Pips
February	0.62%	35.2 Pips

Upcoming key events (London Time)

Fri 01:30 PM USD Nonfarm Payroll Employment

What happened lately

In the United States, the fourth quarter flash estimate for Unit Labor Costs revealed an increase to 3% from 0.8% in the third quarter, according to the Bureau of Labor Statistics. This suggests rising wage pressures, which could potentially lead to increased inflationary pressures. Concurrently, the initial unemployment insurance claims for the week ending February 1 rose to 219,000 compared to 208,000 (revised from 207,000 the previous week), indicating a slight softening in the labor market. Additionally, there was a decrease in Nonfarm Business Labor Productivity in the fourth quarter, with a flash estimate of 1.2% compared to 2.2% in the prior quarter. This decline in productivity, alongside higher labor costs, could suggest inefficiencies or challenges in maintaining competitive output levels.

The developments in the U.S. economy, particularly the rise in labor costs amid decreasing productivity, can have mixed effects on the NZDUSD currency pair. The increase in labor costs might suggest an imminent rise in inflation, which could lead to expectations of tighter U.S. monetary policy. This, in turn, would make the U.S. dollar stronger against the New Zealand dollar, exerting downward pressure on the NZDUSD. Conversely, the rising unemployment claims and decreased productivity might signal a slowing economic momentum, which could weigh on the U.S. dollar if market participants anticipate a more cautious approach from the Federal Reserve. However, given the focus on inflation, the prevailing sentiment might lean towards a stronger U.S. dollar in the short term due to the labor cost pressures.

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What can we expect from NZDUSD today?

NZDUSD on Thursday dropped -0.18% to 0.56710. Price is above 9-Day EMA while Stochastic is rising.

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

Looking ahead for the day, immediate support level is at S1 0.56512 with break below could see further selling pressure towards S2 at 0.56314. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 0.56910 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 0.56513 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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