Forex Market: NZD/USD pauses rally after US President Trump’s ban on WeChat and TikTok, markets eye key Non-Farm Payrolls data

After a three-day streak of gains, NZD/USD took a breather on Friday, as the US Dollar bounced off a more than two-year low against a basket of six major peers after US President Donald Trump moved to prohibit transactions with two China-based corporate entities that own popular mobile applications TikTok and WeChat.

Market players are also expecting the official government data on US Non-Farm Payrolls due out later on Friday, after an earlier report by ADP revealed a sharp slowdown in private payrolls in July.

Yesterday US President Trump issued an executive order that banned transactions with ByteDance, the owner of TikTok video-sharing app, as he categorized that app as a threat to national security. The US President also said that transactions with China-based Tencent Holdings Ltd, the owner of messaging app WeChat, would be banned as well.

Meanwhile, negotiations between White House officials and congressional Democrats on new coronavirus relief legislation have so far shown no sign of an agreement. Reaching a consensus on the cost of fiscal stimulus measures is considered critical to prevent the US economy from losing more traction, with over 30 million people in the country being on jobless benefits.

Many analysts now expect a further US Dollar depreciation due to fading expectations of a V-shaped economic recovery, while a dismal NFP report could only fuel market concerns.

As of 6:58 GMT on Friday NZD/USD was edging down 0.37% to trade at 0.6663, while moving within a daily range of 0.6661-0.6691. The major pair advanced 2.70% in July, which marked its fourth straight month of gains. It has risen another 0.57% so far this week.

Today’s market focus will be on the more comprehensive non-farm payrolls report, which reflects employment in US public and private sectors. Employers in all segments of US economy, excluding the farming industry, probably added 1.600 million new jobs in July, according to market expectations, after a job gain of 4.800 million in June. The latter has been the sharpest monthly job growth on record, but yet, the job market is still quite far from full recovery.

There have been certain concerns among analysts that the latest data does not capture the full scale of job losses, because many people are still being classified as employed, but are actually absent from work.

Meanwhile, the rate of unemployment in the country probably eased to 10.5% in July, according to estimates, from 11.1% in June. The official government report is due out at 12:30 GMT.

Bond Yield Spread

The spread between 1-year New Zealand and 1-year US bond yields, which reflects the flow of funds in a short term, equaled 12.9 basis points (0.129%) as of 6:15 GMT on Friday, or unchanged compared to August 6th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6669
R1 – 0.6708
R2 – 0.6729
R3 – 0.6769
R4 – 0.6809

S1 – 0.6648
S2 – 0.6608
S3 – 0.6587
S4 – 0.6566

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