NZD/USD ignores mixed RBNZ FSR ahead of New Zealand Employment

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  • NZD/USD stays pressured, eases of late, following RBNZ’s bi-annual FSR.
  • Market sentiment dwindles on Yellen’s comments, covid woes.
  • Strong US data adds to the greenback’s strength.
  • New Zealand Q1 employment data, RBNZ press conference and risk catalysts will be the key.

NZD/USD seesaws around 0.7150-45 following the release of the Reserve Bank of New Zealand’s (RBNZ) Financial Stability Review (FSR) amid the early Wednesday morning in Asia. In doing so, the kiwi pair sellers seem to catch a breather after dropping to the three-week low ahead of the key data and events.

RBNZ’s bi-annual FSR initially praised New Zealand’s (NZ) economic recovery from the coronavirus (COVID-19) pandemic before citing fears of vulnerabilities in the financial system, despite the system being sound. The central bank also said, “New capital rules will start being implemented from 1 October 2021.”

Read: RBNZ: The financial system is sound but vulnerable

It’s worth mentioning that the NZD/USD prices have been consolidating the latest losses after US Treasury Secretary Janet Yellen took a U-turn from her initial comments that suggesting an interest rate hike is favorable to the US, which backed the risk-off mood. Not only Yellen’s comments but rising fears of the covid in Asia and RBNZ Governor’s sickness also refreshed multi-day low during Tuesday.

Amid these plays, Wall Street closed mixed, after the initial downbeat performance, whereas the US 10-year Treasury yields dropped 1.5 basis points (bps) to 1.59%. Further, the US dollar index (DXY) became the market favorite due to its safe-haven status.

Looking forward, the first quarter (Q1) NZ jobs report will the immediate catalyst for the NZD/USD ahead of RBNZ’s press conference where Governor Adrian Orr will be absent. It should be noted that the likely slack in the jobs report may weigh on the NZD/USD and hence traders should remain cautious.

“Our forecast sits between these scenarios – we think that both employment and participation rose in Q1, but because matching issues in the labor market are weighing on jobs growth, the unemployment rate may rise slightly,” said the Australia and New Zealand Banking Group (ANZ) ahead of the event.

Also read: New Zealand Employment Preview: Participation rate holds the key as jobless rate seen steady

Technical analysis

As NZD/USD sellers battle 21-day and 50-day SMA convergence, near 0.7150-45, to keep the reins, an upward sloping trend line from April 01, around 0.7115, also acts as the key support to watch during the quote’s further weakness. Alternatively, the 0.7200 threshold guards the kiwi pair’s short-term recovery moves.