New Zealand Dollar Rallies on Stellar Jobs Data, AUD/NZD to Reverse？

New Zealand Dollar, AUD/NZD, New Zealand Jobs Data – TALKING POINTS

• Stock markets rallied with commodity-linked assets amid ongoing US stimulus talks

• New Zealand Dollar rallied after local jobs data published strong employment figures

• AUD/NZD may now aggressively retreat from descending 5-year resistance channel

Wall Street traded ended on a happy note with the Dow Jones, S&P 500 and Nasdaq indices up 0.62, 0.36 and 0.35 percent, respectively. The cycle-sensitive Australian and Canadian Dollars rallied with stocks at the expense of the haven-linked US Dollar. The risk-on mood may be the result of hope surrounding ongoing congressional discussions about another coronavirus stimulus package.

However, investors pricing of what appears to be the expectation of another timely ratification and implementation creates an asymmetrical risk if talks are delayed by a stalemate. With the 2020 election coming up in a politically and economically distressed environment, the pressure to remain favorable in the publics fickle eye is more urgent than ever.

Recommended by Dimitri Zabelin

Top Trading Lessons

Get My Guide

Consequently, this may cause policymakers to dig in their heels and the costs intransigence may then spoil risk appetite and catapult the battered US Dollar higher. To learn more about how to trade the impact of politics on financial markets, be sure to follow me on Twitter @ZabelinDimitri.

Wednesdays Asia-Pacific Trading Session

The New Zealand Dollar may extend its rally from Wall Street trade after local jobs data printed better-than-expected figures. New Zealands unemployment rate for Q2 fell to 4.0%, far under the 5.6% estimate with the year-on-year employment change show a 1.2% print, significantly higher than the dismal -1.2% forecast. The participation rate was unchanged at 69.7%, while the prior reading was revised upward from 70.40% to 70.50%.

NZD may also rise as a result of the buoyancy echoing from Wall Street trade into Asia. Growth-linked currencies and cycle-sensitive commodities like crude oil may rise. The risk-on tilt may further dampen the appeal of USD and the anti-risk JPY. The New Zealand Dollar‘s rise may also pressure AUD/NZD at a time when it is trading in a critical juncture. What’s the outlook ahead？

AUD/NZD Analysis

AUD/NZD may once again retreat from puncture the tip of a formidable, 5-year descending resistance channel after failing to do so most recently in late-May/early-June. The pairs capitulation may also cause the early-July uptrend to shatter and could cause bearish sentiment to swell. A break with follow-through could cause the pair to retreat, though selling pressure may start to abate at the bottom of the uptrend at 1.0555.

AUD/USD chart created using TradingView