NZD/USD Bears Eye Deeper Correction Amid Positive US JOLTS ReporThe NZD/USD pair continues its bearish trajectory following the release of strong US JOLTS Job Openings data yesterday. This has intensified market speculation about the resilience of the US labor market, which could lead to further tightening by the Federal Reserve. As a result, the Kiwi dollar has come under pressure, with bears targeting a deeper correction.
In our previous forecast:
we highlighted the potential for a drop after NZD/USD encountered strong resistance in a key supply zone. The price has continued its downward momentum, confirming our analysis, and the Commitment of Traders (COT) report further supports a bearish continuation, with commercial hedgers reducing their long positions. The market dynamics show potential for the trend to reach our second take-profit target.
Fundamental Outlook: Labor Market Signals Weigh on Kiwi
The US JOLTS report, showing unexpectedly high job openings, signals strength in the labor market. This is significant because robust employment data often leads to increased expectations for tighter monetary policy from the Federal Reserve. As the central bank looks to combat inflation while maintaining economic stability, positive labor indicators like these reinforce the likelihood of interest rates remaining elevated for an extended period.
On the New Zealand side, a mixed economic outlook and weakening demand for riskier assets have further pressured the NZD. With inflation in check but economic growth showing signs of stagnation, the Reserve Bank of New Zealand (RBNZ) is not expected to be as aggressive as the Fed in future monetary policy moves. This policy divergence creates a favorable environment for NZD/USD bears.
COT Report Signals Further Downside
The COT report confirms that the institutional market is shifting towards further bearish positions in NZD/USD. Commercial traders have been reducing their long exposure, while speculators are increasingly taking short positions. This sentiment, combined with the technical rejection in the supply area, suggests that the trend is far from over.
Key Data to Watch: US Unemployment Claims
Today, traders will be closely watching the release of **US Unemployment Claims** data. If the numbers come in better than expected—indicating a stronger labor market—this could further bolster the US dollar and drive NZD/USD lower. A positive surprise in the data would support the case for the Fed to maintain its current stance on interest rates, thus enhancing the bearish outlook for NZD/USD.
Technical Analysis: Deeper Correction in Sight
Technically, the NZD/USD remains under pressure after its rejection at the supply area. The price is trending below key moving averages, and momentum indicators show bearish divergence, suggesting that the downside momentum is still strong. A break below the recent low could open the door for further losses.
In conclusion, NZD/USD bears are firmly in control, and with favorable economic data from the US, a deeper correction seems likely. Traders should keep an eye on today’s Unemployment Claims report for further clues on the pair’s direction.
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