New Zealand Dollar To Weaken as Employment, Wage Growth Falter

At the same time, Prime Minister John Key argued that New Zealand dollar is “a little bit overvalued” and said that he would “prefer a lower exchange rate” to help support the recovery, but went onto say that “it is very difficult” for the government to temper the appreciation following the weakness in the global reserve currency. In addition, Mr. Key saw a risk for the government budget to stay in deficit “for a decade” after marking the first short-fall in nine-years, and the cautious outlook held by policy makers may continue to drag on the New Zealand dollar as investors weigh the prospects for a sustainable recovery. Nevertheless, the economic docket for the following week is expected to reinforce a weakened outlook for household spending as economists forecast employment to fall 0.3% in the third quarter, with the jobless rate anticipated to reach a nine-year high of 6.4% from 6.0% in the three-months through June, while private wages are projected to rise 0.3% during the same period, which would be the lowest level of growth since 2000. As a result, we may see the NZD/USD continue to test the 50-Day SMA at 0.7170 for near-term support however, the kiwi-dollar may continue to retrace the advance from earlier this year and break below the moving average, which would expose the 100-Day SMA at 0.6846, as investors curb expectations for higher borrowing costs in New Zealand. However, as risk trends continue to dictate price action in the currency market, a rise in risk appetite may lead the pair to retrace the sharp decline over the following week and could test the 10-Day SMA (0.7448) for resistance. - DS