New Zealand Dollar advances as US labor market weakness pressures the USD

On Friday, the New Zealand Dollar (NZD) experienced gains as the US Dollar (USD) faced pressure due to weaker-than-expected US employment data. The NZD/USD pair rose by 0.36% to trade around 0.5890, as the Reserve Bank of New Zealand's (RBNZ) hawkish stance supported the Kiwi. The Bureau of Labor Statistics (BLS) reported that the US Nonfarm Payrolls (NFP) declined by 23K in July, falling below market expectations of an increase of 80K jobs.

Previous months' payrolls also saw significant revisions downwards, resulting in a combined decrease of 103K jobs. The US unemployment rate decreased to 4.1% from 4.2%, while average hourly earnings growth slowed to 3.2% from a revised 3.4%, indicating a gradual cooling of the US labor market. This cooling trend has weakened the US Dollar, as investors reduced expectations of further monetary tightening by the Federal Reserve (Fed).

The chance of a 25-basis-point rate hike in September fell to 42%, down from 55% the previous day and 67% a week ago. Despite this, Richmond Fed President Thomas Barkin's comments suggested a less pessimistic interpretation of the report, emphasizing low hiring and low firing in the labor market and strong corporate earnings. The New York Fed Survey of Consumer Expectations also revealed a decline in one-year inflation expectations to 3.6% from 3.7% in June, while three-year and five-year inflation expectations remained unchanged.

These factors contributed to the NZD's strength against the USD. Technical analysis showed that NZD/USD was trading near the 0.5890 level, with support at 0.5884, 0.5876, and 0.5860, and resistance at 0.5909. The relative strength index (RSI) hovered near 61, indicating strong bullish pressure but not yet overbought. A close above 0.5909 could potentially trigger further recovery, while a failure to do so might lead to a corrective pullback towards the nearby support cluster.