Below 0.5600: New Zealand Dollar eases ahead of US NFP data

• 0.5585 is the level NZD/USD retreats towards in Friday’s Asian session.
• 5.7%: New Zealand’s Q3 unemployment rate rises to its highest since 2015.
• A Democratic sweep of Congress could weigh on Treasury yields and the US Dollar.

NZD/USD slips towards 0.5585 in Asian trading on Friday. Weak employment figures and political uncertainty in New Zealand extend the New Zealand Dollar’s (NZD) losses against the US Dollar (USD). Later in the day, attention turns to the US September jobs report.

5.7% was New Zealand’s unemployment rate in the three months ended September, according to Statistics New Zealand figures published earlier this week. The reading marked the highest in nearly 11 years, up from 5.6% in the preceding quarter and above the 5.5% market consensus.

Saturday’s New Zealand general election is the next focus. Pressure is building on Christopher Luxon's centre-right National Party-led coalition to show that its policies can support growth and relieve cost-of-living pressures. A LPSOS poll earlier this week identified inflation and the cost of living as voters’ leading concern ahead of the election contest on November 7.

Control of both the US Senate and House of Representatives shifted from Republicans to Democrats on Tuesday as the Democrats secured majorities. Tens of millions of voters delivered a strong rebuke to President Donald Trump, handing Democrats significant victories in several Republican strongholds for the first time in decades.

Oil prices fell following the Democratic sweep of Congress, amid speculation that the election would hasten an end to the Iran war. Traders also reduced bets on US Federal Reserve (Fed) rate increases. CME’s FedWatch tool now puts the market-implied probability of a December Fed rate rise at nearly 70.9%.

RBNZ surprise sharpens RBA scrutiny as New Zealand and Australia diverge

For Rabobank’s strategists, the surprise RBNZ decision has shifted attention to the RBA. They observe that “last week’s decision by the RBNZ to leave rates unchanged blindsided a market that was priced for a hike,” and has “led to some soul searching ahead of this week’s RBA decision.” At its policy meeting, the central bank highlighted conflicting conditions: while “annual inflation is expected to increase to 4.4% in the December quarter (largely on the back of fuel),” “domestic demand remains subdued.”

The contrast between the two economies is central to Rabobank’s assessment. Its strategists point out that “the performance of the New Zealand economy has been very different from that of Australia in recent years, with the former only emerging from recession in late 2024 to an unbalanced performance last year.” They also note that “despite some strong green shoots for New Zealand in Q1 2026, this was ahead of the headwinds caused by the Iran war.”

Investors positioned for additional tightening are therefore wary of being wrong-footed by another central bank. In Rabobank’s view, “the shock of last week’s RBNZ policy decision has underpinned some concerns over the signals that RBA Governor Bullock may provide this week,” against this backdrop.

Barkin’s demand and inflation signals keep Dollar bulls watchful as sentiment eases

6/10 is the FXS Speechtracker score for Barkin’s speech. Close to the historical average of 6.1/10, it indicates a consistent, moderately hawkish tone. His focus on resilient demand, robust earnings, widespread cost pressures and the need to pass those costs on points to a preference for policy that remains at least neutral to restrictive. That assessment is reinforced by his view that inflation is unlikely either to accelerate or to decline. The phrase “gradual makes sense” addresses the pace of policy rather than its direction. Barkin also identified AI-driven demand and AI buildout as sources of near-term inflation pressure, while retaining inflation as the foremost risk. Together, these remarks support expectations of sustained policy firmness that favour the Dollar, even with the policy rate characterised as “somewhere around neutral.”

144.92 is the latest FXS Fed Sentiment Index reading, down 0.31 points. The decline signals a slight easing in perceived hawkishness, although the index remains firmly hawkish. With demand resilient, inflation sticky and AI adding cost pressures, a reading well above 100 still indicates a policy stance that should support the Dollar. Markets continue to adjust expectations for the speed, rather than the direction, of future moves.

100-day SMA caps NZD/USD: Technical outlook stays bearish

36 is the daily Relative Strength Index (RSI) reading for NZD/USD. It reflects only a limited rebound from oversold conditions, suggesting that selling momentum is moderating rather than reversing. The near-term daily chart remains bearish, with spot below both the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-period middle SMA. Trading just above lower Bollinger Band support also highlights the continuing downward pressure.

0.5640, around the Bollinger 20-period middle SMA, is the first resistance level. The upper Bollinger Band at 0.5715 follows, ahead of the more significant 100-day SMA barrier near 0.5755, where heavier supply could limit recoveries. Immediate support lies at the lower Bollinger Band, at 0.5565. A clear break below that level would likely pave the way for additional losses. If it holds, the pair remains in weak consolidation within the broader bearish structure.

(The technical analysis of this story was written with the help of an AI tool. Know more.)