NZD/USD clings to gains near mid-0.65s following upbeat employment data
- Markets remain focused on the US-China trade conflict.
- US Dollar Index stages recovery following sharp drop.
- Unemployment rate in New Zealand drops to 3.9% in second quarter.
Following Monday's volatile session, the NZD/USD pair pushed higher toward the 0.66 mark in the early trading hours of the Asian session boosted by the upbeat labour market data but failed to preserve its momentum. With the trading action finally turning subdued on Tuesday, the pair seems to be moving in a consolidation channel near mid-0.65s.
New Zealand jobs data surprise to the upside
The data published by Statistics New Zealand today showed that the Unemployment Rate in the second quarter dropped to 3.9% from 4.2% to better the market expectation of 4.3%. Further details of the report showed that employment increased by 0.8% in the same period following the 0.2% contraction in the previous quarter. Later in the session, the Reserve Bank of New Zealand announced that the third-quarter inflation expectations slumped to 1.86% from 2.01% and made it difficult for the NZD to continue to gather strength.
On the other hand, after touching its lowest level since October 2016 amid the heightened fears of a prolonged US-China trade war, the 10-year US Treasury bond yield is posting modest recovery gains today, helping the US Dollar Index (DXY) pull away from the two-week lows. At the moment, the DXY is up 0.15% on the day at 97.54.
Nevertheless, markets remain focused on the headlines surrounding the trade conflict and this recovery seems like a technical correction. Earlier today, the Editor-in-chief of Chinese and English editions of the Global Times, Hu Xijin, hinted that the war is likely to intensify. "The trade war has been protracted to now, the US has put the biggest card on table, China is relieved. Now fight, China no longer expects goodwill from the US," Xijin tweeted out.
Later in the session, the bi-weekly Global Dairy Trade auction in New Zealand will be looked upon for fresh impetus.
Technical levels to watch for