NZD/USD breaks the two-week range to the downside
The NZD/USD is falling sharply on Tuesday amid a stronger dollar and ahead of the FOMC meeting and the New Zealand employment report. The pair broke a range and tumbled to 0.7106, reaching the lowest level since October 19. The kiwi dropped against its G10 rivals during the American session, probably weakened by the rebound in AUD/NZD. The US dollar rose across the board, pushing NZD/USD further to the downside. The greenback gained momentum even as US yields dropped modestly and the fact that stocks were higher on Wall Street. The AUD/NZD bottomed hours ago following the Reserve Bank of Australia at 1.0403, the lowest in a month, and as of writing, is at 1.0470.
Early on Wednesday, the employment report is due in New Zealand. “We are more hawkish on the Q3 NZ labor market report and expect it to show that the labor market has turned even tighter despite most parts of NZ being in lockdown in Q3. We expect the Q3 unemployment rate to fall to 3.5% from 4.0% in Q2 (cons: 3.9%),” wrote TD Securities analysts. They point out employment growth is likely to be strong again, “up 1.0% q/q (cons: 0.4%, Q2:1.1%) with Stats NZ's monthly employment indicator showing filled jobs rising 1.3% q/q at the end of Q3.” Then, during the second half of the American session, the Federal Reserve will announce its monetary policy decision. No change in rates is seen; an announcement regarding the purchase program is expected. Volatility in the bond and currency markets will likely rise around the event. Previously, price action could remain sideways.