Dollar drops below key support level as jobs data weighed, faces stiff resistance at 84c
The New Zealand dollar fell below a key support level of 84.50 US cents as employment data painted a mixed view of the labour market.
The kiwi fell as low as 84.27 US cents from 84.53 cents immediately before the 10:45am release of the jobs data in Wellington, and was trading at 84.38 cents at midday. The local currency weakened overnight but had failed to break through 84.50 cents amid falling dairy prices, better US economic data and as investors favoured safe haven currencies on concern about heightened tensions in the Ukraine.
The New Zealand dollar has been in decline since touching a high of 88.35 US cents last month amid weakening commodity prices, a pause in interest rate hikes, Reserve Bank intervention threats and increased demand for the greenback. Currency strategists say the next major hurdle in the kiwi's decline is the June low of 84 US cents.
"There's headwind essentially all the way into the 84 level," said Bank of New Zealand currency strategist Raiko Shareef. "I can imagine there would be pretty eager bids just above 84 cents, people looking to pick that up, and all the way to this level there would be bids scattered through so I imagine that's what's keeping us still here. This entire range between 84 and 84.60 is just fraught with technical support and it was always going to be very messy for the market to push through.
"It is back down towards testing this area where there is a whole bunch of support."
The kiwi will probably need a major catalyst to push it lower, and it could bounce back in overnight trading, Shareef said.
Statistics New Zealand said the second quarter unemployment rate fell to 5.6 percent, below the 5.8 percent forecast in a Reuters poll and down from a revised 5.9 percent in the first quarter. The participation rate fell 0.3 of a percentage point to 68.9 percent, below expectations, as the workforce remained static and the population grew. Employment grew 0.4 percent in the quarter, below the 0.7 percent pace predicted by economists and up 3.7 percent on an annual basis.