NZD/USD was trading near 0.5890 on Friday, up 0.36% on the session, as the US Dollar slid after a weak US jobs report and as the Reserve Bank of New Zealand maintained a hawkish stance. US Nonfarm Payrolls fell by 23K in July versus expectations for an 80K rise, while June was revised to 20K from 57K and May to 63K from 129K, leaving a combined downward revision of 103K. The unemployment rate eased to 4.1% from 4.2%, and annual Average Hourly Earnings growth slowed to 3.2% from a revised 3.4%. Markets repriced Federal Reserve policy: the CME FedWatch tool put the probability of a 25-basis-point September hike at 42%, down from 55% a day earlier and 67% a week earlier.
New York Fed survey data showed one-year inflation expectations at 3.6% in July versus 3.7% in June, while three-year and five-year readings were unchanged. In technical terms, the pair held above a reclaimed downtrend line near 0.5884 and traded above the 100-period and 200-period moving averages at 0.5876 and 0.5854, with RSI near 61. Support levels were flagged at 0.5884, 0.5876, 0.5860 and 0.5854, while resistance sat at 0.5909. The technical section was produced with help from an AI tool.
Strategy for Capitalizing on NZD/USD Upside
We should respond to this sudden shift by establishing long positions on the NZD/USD pair, utilizing call options or futures to capture the emerging upward momentum. The immediate target for this move is the key resistance level at 0.5909, with potential to run higher if the dollar’s weakness persists. Historically, when US nonfarm payrolls miss expectations by such a wide margin, the US Dollar Index (DXY) frequently experiences a multi-week decline of 1% to 2% as market positioning adjusts.
Fundamental and Risk Management Considerations
The massive downward revision of 103,000 jobs for May and June indicates that the US labor market is cooling much faster than the Federal Reserve anticipated. With the probability of a September rate hike falling rapidly to 42%, US Treasury yields are poised to slide, reducing the greenback’s yield advantage. Meanwhile, the Reserve Bank of New Zealand’s hawkish stance provides a solid fundamental floor for the Kiwi, making the NZD a preferred vehicle for trading USD weakness.
To manage risk, we suggest placing stop-losses just below the moving average support cluster between 0.5876 and 0.5854 on the hourly chart. Since the Relative Strength Index (RSI) sits at 61, the pair has ample room to run before entering overbought territory, validating a buy-on-dips strategy near 0.5884. A clean daily close above 0.5909 will serve as our trigger to add to bullish derivative positions for the weeks ahead.
