New Zealand Dollar slips below 0.5600 ahead of US NFP release

• Friday’s Asian trading sees NZD/USD ease towards 0.5585.
• At 5.7% in Q3, New Zealand’s unemployment rate reached its highest level since 2015.
• A Democratic sweep of Congress could weigh on Treasury yields and the US Dollar.

Weak employment figures and political uncertainty in New Zealand are extending the New Zealand Dollar’s (NZD) decline against the US Dollar (USD). Selling pressure has taken NZD/USD towards 0.5585 in Friday’s Asian session, with attention set to turn to the US September jobs report later in the day.

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

Saturday’s New Zealand general election will now come into focus. Pressure is growing on Christopher Luxon’s centre-right National Party-led coalition to show that its policies can strengthen growth and alleviate cost-of-living pressures. A LPSOS poll released earlier this week identified inflation and the cost of living as voters’ leading concern ahead of the election contest on 7 November.

Control of both the US Senate and House of Representatives passed from Republicans to Democrats on Tuesday as the Democrats secured majorities in both chambers. Tens of millions of voters delivered a sharp rebuke to President Donald Trump, handing Democrats major 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 result would hasten an end to the Iran war. Traders also scaled back bets on interest rate increases by the US Federal Reserve (Fed). According to CME’s FedWatch tool, markets now assign a probability of nearly 70.9% to a Fed rate rise in December.

RBNZ surprise unsettles RBA watchers as New Zealand’s economy diverges from Australia’s

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

In comparing economic conditions on either side of the Tasman, Rabobank observes 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.” The strategists also caution 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 further tightening are consequently alert to the risk 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 economic backdrop.

Dollar bulls stay alert as Barkin highlights firm demand and persistent inflation despite softer sentiment

A score of 6/10 on the FXS Speechtracker puts Barkin’s speech broadly alongside its historical average of 6.1/10, reflecting a consistent, moderately hawkish message. His focus on robust demand, strong earnings and widespread cost pressures that need to be passed on points to a preference for keeping policy at least neutral to restrictive. That assessment also reflects his view that inflation is unlikely either to accelerate or to decline, with “gradual makes sense” referring to the pace of policy rather than its direction. Barkin’s remarks that AI-driven demand and the AI buildout are fuelling near-term inflationary pressure, and that inflation remains the principal risk, support expectations of continued policy firmness. Those expectations underpin the Dollar even though he describes the policy rate as “somewhere around neutral.”

A 0.31-point decline left the FXS Fed Sentiment Index at 144.92, signalling a slight easing in perceived hawkishness while keeping the measure firmly in hawkish territory. With demand remaining solid, inflation proving persistent and AI-related costs adding pressure, the index’s position well above 100 still points to a policy stance that should support the Dollar. Markets, meanwhile, continue to refine expectations for the pace of future policy changes rather than their direction.

Technical Analysis: NZD/USD remains under pressure beneath the 100-day SMA

Trading below both the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-period middle SMA leaves NZD/USD with a bearish near-term outlook on the daily chart. The pair is sitting just above support at the lower Bollinger Band, highlighting continued downside pressure. Meanwhile, a Relative Strength Index (RSI) reading of 36 marks only a limited rebound from oversold territory, suggesting that selling momentum is fading without yet reversing.

The first resistance on any recovery lies around 0.5640 at the Bollinger Bands’ 20-period middle SMA. Beyond that, the upper Bollinger Band stands at 0.5715, ahead of the more significant barrier near 0.5755 at the 100-day SMA, where heavier selling could limit rebounds. Immediate support is provided by the lower Bollinger Band at 0.5565. A clear break below that level would probably pave the way for additional losses; holding above it would instead leave the pair in weak consolidation within the wider bearish structure.

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