NZD/USD Breaks Support as APAC Traders Brace for Australian Jobs Report, PBOC Action

New Zealand Dollar, NZD/USD, Bond Yields, PMI, GDP, Jobs Report, PBOC – Talking Points

• New Zealand Dollar falls versus US Dollar despite aggressive hike from the RBNZ
• Australian jobs report and a potential RRR cut from the PBOC on watch for APAC
• NZD/USD bears may test the 100-d SMA after prices broke through trendline support

Thursday’s Asia-Pacific Outlook

The New Zealand Dollar weakened versus the US Dollar and Australian Dollar overnight despite the Reserve Bank of New Zealand making an aggressive 50 basis point (bps) rate hike yesterday. Analysts expected a 25 bps hike. New Zealand government bond yields fell following the RBNZ announcement, with bond traders perhaps believing that future tightening has now been front-loaded. The 5-year yield fell over 130 basis points, sapping the Kiwi Dollar’s advantage regarding rate differentials.

Meanwhile, the US Dollar slipped against the Euro and British Pound, which dragged the broad-based DXY index lower as well. Traders eased their bets on Federal Reserve rate hikes, which pushed Treasury yields lower. The 10Y/2Y Treasury curve steepened, pushing the gauge further away from its inversion. That inversion, earlier this month, triggered a recession warning that pushed US stock indexes lower, including the S&P 500. The benchmark US index has yet to recover its losses.

This morning, New Zealand’s manufacturing activity for March increased to 53.8 from 53.6, according to Business NZ’s purchasing managers’ index (PMI). The Kiwi Dollar was unfazed by the data’s release. Later today, Singapore is due to report its first-quarter gross domestic product (GDP) growth. That will be the first major economy to report Q1 GDP data, and analysts expect to see it cross the wires at 3.8% on a year-over-year basis.

The Australian Dollar may see considerable volatility today ahead of the March jobs report and a potential move from the People’s Bank of China (PBOC). Australia is set to report a gain of 30k on its employment roles for March, according to a Bloomberg survey. That gain would coincide with a drop in the jobless rate and a rise in labor force participation. A better-than-expected set of data would likely bolster the Aussie Dollar. The PBOC may also cut its reserve ratio requirement (RRR) by 0.5% after China’s cabinet specifically called for such a move earlier this week. That would free up around 1 trillion Yuan in the Chinese economy.

NZD/USD Technical Forecast

NZD/USD broke through a key trendline stemming from the January 2022 swing low as well as the 50-day Simple Moving Average (SMA). The 100-day SMA managed to fend off an intraday move but bears may attempt to pierce the level again. The MACD oscillator made a cross below its centerline, which may add to bearish sentiment in the currency pair’s technical position.

NZD/USD Daily Chart

Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter