NZD/USD crumbles post-NFP; Is the Kiwi knocked out cold?

Over the last week, the NZD/USD brave bullish recovery was worth noting. However, what goes up at some point comes down, as the commodity currency crumbled after “slightly disappointing” (Analysts at Brown Brothers Harriman) and a “very decent” (from Fed Cleveland's President Loretta Mester) 156k’s NFP data.  

Understanding a Not So Bad NFP

Valeria Bednarik, Chief Analyst at FXStreet offers important details on the matter, “The US economy created 156K new jobs in December according to the monthly Nonfarm Payrolls report, missing expectations of 178K.

Previous month figure, however, suffered an upward revision to 204K from 178K, while the unemployment rate ticked higher as expected, from 4.6% to 4.7%. The immediate reaction to the news sent the EUR/USD pair to a new weekly high of 1.0619, but the pair changed course and fell as the market focused on a sharp recovery in wages.

According to the same report, Average Hourly earnings rose by 0.4%, against the previous backdrop of -0.1%, whilst year-on-year wages rose by 2.9%, from previous 2.5%. The dollar retains part of the losses triggered by FED's Minutes, and the positive reading in salaries is just preventing it from plummeting.”

Then, why is the kiwi dollar almost out?

Last week’s recovery was based on two basic scenarios: another FOMC blurry ongoing statement and a well-known (and expected) dollar pullback that some analysts expect to go deeper before resuming its triumphant march in 2017.

On the other hand, the New Zealand dollar had little or nothing to mitigate dollar strength as its escape options are limited due a dairy dependency and a business partner like China, that keeps battling the “adjust” economy demon.

Technical Levels to Watch

On the short-term, there is evidence to advocate for more downside, as prices break the last two-week 0.6970 handle (previous support/resistance/support). Furthermore, more technical evidence in the Stochastic (5,3,3) suggests the pair is not completely oversold. 

However, a long-term view in the weekly chart builds up another scenario worth considering in the next trading sessions. The ascendant bullish channel from August/September 2015 indicates support close to the channel lower range if prices were to hold their current stand and break above the 50 SMA, then the kiwi dollar may continue towards the next logical resistance around the 0.7100 figure.