NZD / USD probing 0.7200, set to stay in range ahead of key risk events

• The NZD / USD is testing the 0.7200 level and the NZD is outperforming on Monday, but the pair is within recent ranges.
• Catalysts for a recent range break include New Zealand jobs data from Wednesday or the FOMC meeting, or the US NFP.

Despite the lack of specific fundamental catalysts related to New Zealand, the kiwi is one of the best performing G10 currencies on Monday, with nursing gains of the NZD / USD on the day of about 0.4%. Currently testing the 0.7200 level, the pair remains well within the well-established range of 0.7130-0.7220 from the last week and a half. A stronger-than-expected number has so far failed for the US ISM leading manufacturing index for October (which hit 60.8 versus the forecast of 60.5), as well as further increases in the employment sub-index to 52 and the Price index paid at a high 85.7. to result in a broader USD strength, which for now allows NZD / USD to remain compliant. The report contained further evidence that the US (and therefore global) manufacturing industry continues to suffer greatly from supply chain disruptions, with auto production particularly affected, which should strengthen the Fed’s growing conviction that supply-driven inflation may take longer to disappear.

Risk events

Indeed, this week’s Fed meeting is a key event and will be a key driver of the NZD / USD on Wednesday, as will the rest of this week’s US data, such as the release of the ISM Services PMI survey ( Wednesday) and the October Labor Market Report (Friday). But currency market participants should also take note of key employment data to be released in New Zealand this week; The third quarter labor market report will be released early during the Asia Pacific session on Wednesday and unemployment is forecast to fall below 4.0% and potentially to its lowest level since 2008. Westpac notes that “employment indicators have They have all been remarkably strong in recent months, announcements well above pre-COVID levels, unemployment benefit numbers are falling and jobs are accelerating ”, suggesting that the data should be robust and support the position. from the RBNZ that a gradual withdrawal of monetary policy stimulus is warranted.

If the range breaks

If the NZD / USD breaks north of its recently established range, then technicians would likely be targeting a test of the May 26 high just above 0.7300 as the next stop for the pair. Strong New Zealand employment data with aggressive policymaking implications from the RBNZ could be a catalyst to push in this direction. Conversely, if NZD / USD breaks out of its range to the south, the most immediate support to consider is around the 0.7100 level in the form of a bunch of recent lows and highs, as well as the 200-day moving average.