- NZD/USD recovers from 0.6050 as the US dollar looks to extend recovery ahead of US PMI data.
- Market sentiment is negative as strong US labor demand has dampened prospects for an early rate cut by the Fed.
- Weak NZ employment data would allow RBA policymakers to lean towards a dovish policy stance.
The NZD/USD pair will find buying interest near 0.6050 and rebound near 0.6080 in the London session. The short-term outlook for Kiwi assets remains bearish as they hover near two-month lows following a sell-off led by an upbeat United States. Non-agricultural wages (NFP) data for January dampened hopes for an early rate cut by the Federal Reserve (Fed).
S&P500 futures saw decent losses in the European session, pointing to a bearish trend willingness to take risks market participants. The American dollar The index (DXY) is trading sideways above 104.00 ahead of the US ISM Services PMI for January due at 15:00 GMT. The services PMI, representing the services sector that accounts for two-thirds of the economy, is expected to rise to 52.0 from 50.6 in December.
On the New Zealand dollar front, investors await Q4 employment data due on Tuesday. According to estimates, Unemployment rate rose sharply to 4.3% from 3.9% in the third quarter of 2023. The labor cost index grew at a steady rate of 0.8%. Negative labor market data could prompt Reserve Bank of New Zealand (RBNZ) policymakers to consider an early rate cut.
NZD/USD brings a breakdown of the Bear Flag diagram a pattern formed on a daily time frame. This indicates a continuation of the downtrend after a short-term pullback movement. The 20-day exponential moving average (EMA) near 0.6137 continues to act as a major barricade for NZD bulls.
The 14-day Relative Strength Index (RSI) has moved into the bearish zone of 20.00-40.00, indicating that bearish momentum has been triggered.
Further downside would emerge if the asset falls below the immediate low of 0.6050, exposing the asset to the June 8 low of 0.6026, followed by the psychological support of 0.6000.
On the other hand, further recovery above the January 24 high of 0.6150 would take the asset to the January 31 high of 0.6075 and the January 16 high of 0.6208.