New Zealand Dollar dips below 0.5600 ahead of US NFP data

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

Selling pressure on NZD/USD brings the pair close to 0.5585 in Friday’s Asian session, as the New Zealand Dollar (NZD) deepens its losses against the US Dollar (USD). Weak employment figures and political uncertainty in New Zealand are weighing on the currency. Later in the day, attention will turn to the US jobs report for September.

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

Saturday’s New Zealand general election will be the next focus. Pressure is building on Christopher Luxon’s centre-right National Party-led coalition to show that its policies can stimulate growth and relieve cost-of-living pressures. In a LPSOS poll released earlier this week, voters ranked inflation and the cost of living as their leading concern ahead of the electoral contest on November 7.

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

Oil prices fell following the Democratic sweep of Congress, as speculation grew that the election outcome would hasten an end to the Iran war. Traders also scaled back wagers on interest rate increases by the US Federal Reserve (Fed). According to CME’s FedWatch tool, markets now assign nearly a 70.9% probability to a Fed rate hike in December.

Could New Zealand’s divergence from Australia make the RBNZ surprise a warning for RBA watchers?

An unexpected rate hold in New Zealand has unsettled expectations ahead of Australia’s policy decision. Rabobank’s strategists say 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 a mixed economic picture: 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 economies on either side of the Tasman present contrasting backdrops, according to Rabobank, which notes 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 further observe 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 consequently wary of being caught out by another central bank. Rabobank says that “the shock of last week’s RBNZ policy decision has underpinned some concerns over the signals that RBA Governor Bullock may provide this week,” given this economic backdrop.

Can firm demand and sticky inflation in Barkin’s remarks keep Dollar bulls alert as sentiment eases?

A broadly steady, moderately hawkish message emerges from Barkin’s speech, which receives a 6/10 score on the FXS Speechtracker against a historical average of 6.1/10. His focus on resilient demand, robust earnings, widespread cost pressures and the need to pass those costs on suggests a preference for policy that remains at least neutral to restrictive. That assessment is reinforced by his view that inflation is unlikely either to pick up or decline, while “gradual makes sense” addresses the pace of policy adjustment rather than its direction. Barkin also identifies AI-driven demand and AI buildout as sources of near-term inflationary pressure, with inflation still the most important risk. These remarks support expectations of continued policy firmness, providing a supportive backdrop for the Dollar even though he describes the policy rate as “somewhere around neutral.”

Perceived hawkishness eased modestly as the FXS Fed Sentiment Index fell 0.31 points to 144.92, although the reading remained firmly hawkish. With demand holding up, inflation proving sticky and AI-related costs adding pressure, an index level well above 100 still points to a policy stance that should support the Dollar. The small decline does not alter that backdrop, even as markets refine expectations for the speed, rather than the direction, of future policy moves.

Technical Analysis: Can NZD/USD shake off its bearish bias below the 100-day SMA?

Downside pressure remains evident on the NZD/USD daily chart, with the pair trading below both the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-period middle SMA. Prices sit only slightly above support at the lower Bollinger Band, keeping the near-term outlook bearish. At 36, the Relative Strength Index (RSI) has recovered only modestly from oversold levels, suggesting that selling momentum is moderating rather than reversing.

Any recovery would first encounter resistance around 0.5640 at the Bollinger 20-period middle SMA, with the upper Bollinger Band at 0.5715 marking the next hurdle. Further up, the 100-day SMA near 0.5755 presents a more significant barrier, where increased supply could limit rebounds. Immediate downside support lies at 0.5565, the lower Bollinger Band. A clear break below that level would likely pave the way for additional losses; staying above it would leave the pair in subdued consolidation within its broader bearish structure.

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