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NZD/USD advances as markets digest US data

  • The NZD/USD trend upwards, trading near the 0.6250 level.
  • Following mixed economic data, market dovish expectations for the Federal Reserve policy intensified
  • Next week, the US will report inflation data.

In Friday's session, the New Zealand Dollar (NZD) advanced against the US Dollar (USD), trading at a comfortable level of 0.6250, seeing firm gains. The pair may be probably consolidating the last session's losses as strong labor market data may push the Federal Reserve (Fed) to take a less aggressive stance. Meanwhile, markets remain stubborn, betting on earlier rate cuts.

In December, economic indicators presented a mixed picture in the US. The ISM Services PMI recorded a figure of 50.6, falling short of the expected 52.6 and marking a decline from the previous month's 52.7. On the labor front, December's Nonfarm Payrolls report outperformed expectations with the creation of 216,000 jobs, significantly higher than the consensus estimate of 170,000 and the previous month's 173,000 jobs. Average Hourly Earnings increased by 0.4% month-on-month, exceeding the forecasted 0.3% and mirroring the previous month's growth rate, while the Unemployment Rate remained unchanged at 3.7%, slightly better than the anticipated 3.8%. Altogether, these events suggest a mixed economic outlook with a slowdown in the services sector potentially balanced by a robust labor market and wage growth.

Meanwhile, markets rushed to adjust their dovish bets on the Fed due to the soft service sector figures but seem to be ignoring the upside risks that present the strong labor market figures. As for now, according to the CME FedWatch tool, the odds of a cut in March have risen to 70%, and the probabilities of an additional cut in May are still high. Next week, the US Consumer Price Index (CPI) is due, which may provide further guidance to investors regarding the next Fed decisions.

NZD/USD levels to watch

The daily chart indicators reflect a neutral to practically bullish momentum for the pair. The Relative Strength Index (RSI), residing in positive territory, is ascending, indicating an upward momentum. Nevertheless, the Moving Average Convergence Divergence (MACD) shows flat red bars, suggesting a minor bearish control in the near term.

On the other hand, from a wider perspective, the pair's stance above the 20, 100, and 200-day Simple Moving Averages (SMAs) indicates a predominant bullish force. This signals that despite minor fluctuations, the overall buying momentum outweighs the selling in the broader market scenario.

Considering these factors, the dominating force seen in the pair right now is in favor of the buyers, marking a more bullish-oriented short-term technical outlook. This is supported by the RSI's positive trajectory and the pair's position in relation to the SMAs despite the near-neutral indication signaled by the MACD.


NZD/USD daily chart

 

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