USD became stronger, assisted by a stronger-than-expected nonfarm payrolls release. The escalated US-China tension is also grows creating a concern around the investors. As previously foreshadowed, Trump announced an executive order on Friday that would ban Tik Tok in the US in 45 days time. Unexpectedly, the executive order also singled out instant messaging app WeChat, owned by Chinese tech giant Tencent.

US nonfarm payrolls was stronger than market expectations, with almost 1.8 million new jobs created in July and the unemployment rate falling by more than expected.  Both the unemployment rate (at 10.2%) and underemployment rate (at 16.5% from 18% in June) remain at very high levels and higher frequency data suggest the labour market recovery has lost some momentum over the past month. 

The upside results of payroll and more cautious market sentiment, after Trump’s announcement on WeChat, resulted in a broad-based USD appreciation.

Adding to the optimism, Trump said those on unemployment benefits would receive an extra $400 per week until early December, down from the previous $600 per week supplementary payment, and he would defer payroll taxes until the end of the year for those earning less than $100,000.  75% of the funding for the unemployment benefits extension is due to come from a disaster recovery fund, with states providing the remaining 25%.  Usually, Congress, which is held by the Democrats, would need to approve spending decisions and Trump’s announcement may result in legal challenges.

As far as Kiwi is concerned, ANZ Business Confidence has deteriorated 10 points to -42.4% in August from July’s -31.8. Meanwhile, Activity Outlook for August slipped by 8 points to -17%. And the central bank is expected to keep rates unchanged at 0.25% until March. However, it may boost or extend asset purchases to push down borrowing costs.

NZD/USD 4 Hour Chart:

Support: 0.6561 (S1), 0.6524 (S2), 0.6459 (S3).

Resistance: 0.6663 (R1), 0.6728 (R2), 0.6765 (R3).

Amidst all the catalysts strengthening Dollar against Kiwi we expect a bearish trend for NZD/USD.