By Kymberly Martin
The NZD was the worst performer, with the AUD not too far behind.
Friday night was all about the US labour market report. Ahead of this, the USD had been drifting higher, as many market participants saw the risk of a high-side number. They were not disappointed. Headline non-farm payrolls (292k) were well above expectation. Even the apparent softness in hourly earnings, in the report, was put down to statistical quirk.
The USD index initially spiked higher. However, the broader theme of globally-inspired risk aversion soon resumed.
The USD slipped, along with US bond yields, and the ‘safe haven’ JPY regained the upper-hand. The USD/JPY, at 117.40, now trades at its lowest level since its freak plunge in late-Aug 2015. The EUR/USD also managed to haul itself off its post-payrolls lows, close to 1.0800, to end the week around 1.0920.
Despite comparatively stable commodity markets on Friday night (by recent standards), the AUD and NZD suffered under the weight of market volatility and risk aversion. Our global risk appetite index (scale 0-100%) has slipped below 25%.
The AUD and NZD enjoyed a brief spike higher early on Friday afternoon after the PBOC’s daily fix of the Yuan reference rate. The Chinese authorities are keen that the market does not perceive the RMB as a one-way bet toward depreciation. However, the boost proved short-lived and the AUD and NZD soon resumed a steady down-trend.
The NZD/USD traded down through the 100-day moving average (at 0.6587), before eventually finding some support close 0.6540, early on Saturday morning. It now trades around 0.6550. This week, support is eyed at the mid-Nov lows of 0.6430. Resistance will likely be encountered on any rebound toward 0.6700. It is a reasonably quiet start to the data week so the fate of the NZD will likely lie with risk appetite more broadly. We will remain diligent watchers of Chinese financial markets, while the next China data point (trade balance) is due on Wednesday.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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