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The NZD is the strongest of the major currencies and the JPY is the weakest to start the trading week. The USD is mostly lower with declines versus all the major currencies with the exception of the JPY, despite the rise in yields today. It is the day after the US jobs report which showed a larger than expected increase in jobs, but revisions tempered the gains. The earnings and unemployment rate (tied for lowest level since 1969) is still indicative of a strong jobs market.
The NZDUSD moved above its 100 day moving average last week. The price traded above and below it on Friday strayed during the employment volatility, but closed above. Today, the low price based ahead of the 100 day moving average and moved above the Friday high and the highs from April 13 and 14th. The price is trading at the highest level since April 5 (see chart below). The move above and away from its 100 day moving average increases the bullish bias with the next target area between 0.6363 and 0.63948 on the daily chart.
This week, traders may start to focus more and more on what is happening (or not happening) in Washington. Over the weekend, Treasury Sec. Yellen warned of a potential "constitutional crisis" if Congress fails to raise the debt ceiling, leading to an "economic and financial catastrophe." President Joe Biden will meet with Republican and Democratic leaders this week (on May 9) to discuss debt ceiling negotiations and financial challenges ahead of the June 1 deadline.
The Federal Reserve's Senior Loan Officer Opinion Survey will get traders attention later due to volatility in the U.S. banking sector, particularly among midsize lenders (2 PM ET release today). The report will reveal if lending conditions at regional banks have tightened further since 44.8% of respondents in January reported tightening standards. If this number reaches 60.2%, it would align with levels seen during the last four recessions. The Fed Chair suggested that such an increase might indicate the U.S. central bank is approaching the "neutral rate" for borrowing costs. The FOMC financial stability report will be released at 4 PM ET. Meanwhile, ARKs Cathie Wood said the banking crisis is not over as the Fed has gone too far, and Elon Musk agreed. At the annual Berkshire Hathaway meeting over the weekend, Warren Buffett criticizes bank executives, regulators, and the media for poor messaging around recent bank collapses, contributing to fears of contagion in the financial industry. On Friday, Chicago Federal Reserve Bank President Austan Goolsbee said that it's too early to consider further interest rate hikes in June based on strong job gains in April. He emphasized the need to monitor credit conditions, given recent issues with regional banks like First Republic Bank. Goolsbee cautioned that tighter credit conditions could slow the economy, and future rate decisions should consider the banking system's impact.
On the daily chart below for the Dow Jones, we can see that the price recently broke below the key 33528 support, but the sellers couldn’t sustain the bearish momentum as the NFP report gave the market soft landing vibes due to a resilient and strong labour market, the expected moderation in inflation and the likely pause in rate hikes from the Fed in June.
In fact, we saw a strong rally on Friday after the report and the price now is consolidating a bit before another likely rally in the next few sessions.
On the 4 hour chart below, we can see that the NFP report caused the price to break above the Trendline and the 33538 support turned resistance. The movement was fast though, and the price has overextended a bit as depicted by the distance from the blue short period moving average. In such instances, the price generally consolidates or pulls back before resuming the original trend. We can see that a good spot for another entry for the buyers would be the 33538 support where we can find confluence with the 38.2% Fibonacci retracement level and the red long period moving average.
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