NZD/USD loses ground on NFP data

• The kiwi reached a five-day high at 0.6111 and then fell to the 0.6065 zone.
• Despite the slowdown in US labor demand, the numbers showed strong job growth.
• The dollar gained interest before the increase in yields in the United States.

The NZD/USD pair erased the gains that had pushed the Kiwi to the 0.6111 zone late in the week and fell towards the 0.6065 zone, in response to strong data from the US labor market. The data suggested a possible reassessment of further rate hikes by the Federal Reserve (Fed), which favored the dollar amid rising US bond yields.

Dollar advances on rise in US bond yields after NFPs

According to the US Bureau of Labor Statistics, employment in the United States exceeded expectations, increasing by 339,000 people in May, beating the consensus forecast of 190,000 people. However, the unemployment rate increased slightly, standing at 3.7% instead of the expected 3.5%. Average hourly earnings, which serve as an indicator of wage inflation, stood at 4.3% year-on-year, slightly below the 4.4% forecast.

The broad labor market outlook suggests that labor demand is showing some slowdown, but strong job growth and mounting inflationary pressures indicate that these developments warrant the Fed to reconsider a 25 basis point (bp) hike in the next meeting in June. Consequently, US bond yields are experiencing an upward trend. The 10-year bond yield has risen to 3.68%, reflecting a 2.70% gain on the day. Similarly, the 2-year yield stands at 4.51%, up 3.64%, and the 5-year yield stands at 3.84%, up 3.81%.

As the Fed officials mention, their ultimate goal is to ensure full employment and price stability, so the Consumer Price Index (CPI) for May, which will be released next week, will play a role. crucial when it comes to influencing the expectations and considerations of the Federal Open Market Committee (FOMC) regarding the next decision on interest rates. For now, CME’s FedWatch tool suggests that markets continue to price in higher odds of a no-raise at the next meeting on June 13-14, but the case for a 25 basis point hike gained some prominence.

Levels to watch

According to the daily chart, the NZD/USD pair maintains a short-term bearish outlook as the RSI and MACD suggest sellers are in control, while the pair It is trading below its main moving averages.

In case of further falls, support levels are at the 0.6050 area and below at the 0.6025 area and the key psychological level of 0.60 On the upside, resistances are at the daily highs around at 0.6111, followed by the 200 and 20-day moving averages at 0.6150 and 0.6180 respectively.