NZD/USD trims weekly gains but stays afloat around 0.6220s

• NZD/USD slides almost 0.12% on Thursday; the major is still up by 1% in the week.
• A risk-on impulse fails to propel the NZD/USD higher as traders’ focus shifts to the Fed in the next week.
• The US labor market has begun to slow down, aligning with the housing market, as data reported in the week missed expectations.

The NZD/USD snaps four days of gains on Thursday, barely losing almost 0.06%, despite an upbeat mood around the financial markets. US equities are rising after the ECB hiked rates 50 bps for the first time in 11 years, while better-than-expected US corporate earnings keep investors’ nerves controlled amidst high inflation and a global economic slowdown.

The NZD/USD is trading at 0.6221. After opening near 0.6220s, the major climbed to 0.6241, the daily high, but price action shifted gears, and the NZD/USD tumbled towards the daily low at 0.6184. However, the major recovered some ground, and buyers reclaimed the 0.6200 figure as the New York session winded down.

In the meantime, the greenback is retracing from daily highs, as illustrated by the US Dollar Index (DXY). The DXY is down 0.13%, at 106.896, a tailwind for the NZD/USD, which so far failed to capitalize on the buck weakness. Also weakening across the board are US Treasury yields led by the 10-year benchmark note coupon, down ten bps, at 2.923%.

US employment data, although lagging, shows signs of slowing down

Before Wall Street opened, the US Bureau of Labor Statistics reported that claims for unemployment in the week ending on July 16 rose more than estimations and hit an 8-month high. The labor market begins to show flashes of an aggressive Federal Reserve, but would not deter Jerome Powell and Co. from reaching its target to tame inflation to the 2% target.

At the same time, the Philadelphia Fed Manufacturing Index in June declined for the second consecutive month to -24.8 from -12.4. The report said that “on balance, the firms continued to report increases in employment, but the employment index declined 9 points to 19.4, the lowest reading since May 2021.”

Meanwhile, during the Asian session, the NZ Trader Balance fell from $9.56B to $10.51B YoY from (revised) prior. Monthly figures reported a deficit of $701 million vs. a $195M surplus on the previous month.

What to watch

An absent NZ economic docket would leave NZD/USD traders adrift to US data and the market mood. On Friday, the US docket will feature S&P Global  PMIs, ahead of the next week’s Federal Reserve monetary policy meeting.

NZD/USD Key Technical Levels