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NZDUSD Rebound to Accelerate on Job Growth, Rate Hike Bets

NZDUSD Rebound to Accelerate on Job Growth, Rate Hike Bets

David Song, Strategist

- NZ Employment to Rise 0.6%, Jobless Rate to Slip to 6.0% (Lowest Since 2Q 2009)

- Job Growth has Topped Market Forecast During the Last Three-Straight Quarter

Trading the News: New Zealand Employment Change

Job growth in New Zealand is expected to expand another 0.6% during the third-quarter, and a marked pickup in employment may spark a near-term rally in the NZDUSD as it puts increased pressure on the Reserve Bank of New Zealand (RBNZ) to normalize monetary policy.

What’s Expected:

Time of release: 02/04/2014 21:45 GMT, 16:45 EST

Primary Pair Impact: NZDUSD

Expected: 0.6%

Previous: 1.2%

DailyFX Forecast: 0.6% to 1.0%

Why Is This Event Important:

There’s growing bets that the RBNZ will raise the benchmark interest rate at the March 12 meeting as the region faces a heightening risk for an asset-bubble, and Governor Graeme Wheeler may introduce a series of rate hikes in 2014 as the economic recovery continues to gather pace.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Trade Balance (DEC)

500M

523M

Building Permits (MoM) (DEC)

-5.0%

7.6%

Gross Domestic Product s.a. (QoQ) (3Q)

1.1%

1.4%

The stronger-than-expected recovery along with the ongoing pickup in housing may prompt another marked increase in job growth, and a positive print may help the NZDUSD to retrace the decline from the previous month as it raises the scope of seeing higher borrowing costs in the New Zealand economy.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

ANZ Job Advertisements (MoM) (DEC)

--

-0.7%

Consumer Price Index (YoY) (4Q)

1.5%

1.6%

Retail Sales ex Inflation (QoQ) (3Q)

0.9%

0.3%

Nevertheless, higher costs paired with the slowdown in private consumption may drag on hiring, and a dismal print may trigger further declines in the exchange rate as market participants scale back bets of seeing a rate hike over the coming months.

How To Trade This Event Risk(Video)

Bullish NZD Trade: Employment Rises 0.6% or Greater

  • Need green, five-minute candle following the release for a potential bullish NZDUSD trade
  • If market reaction favors a long trade, buy NZDUSD with two separate position
  • Set stop at the near-by swing low/reasonable distance from entry; need at least 1:1 risk-to-reward
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit

Bearish NZD Trade: New Zealand Job Growth Disappoints

  • Need red, five-minute candle to consider a short New Zealand dollar position
  • Carry out the same setup as the bullish NZDUSD trade, just in the opposite direction

Potential Price Targets For The Release

Join DailyFX on Demand to Cover Current NZDUSD Trade Setups

NZDUSD Daily

Forex_NZDUSD_Rebound_to_Accelerate_on_Job_Growth_Rate_Hike_Bets_body_Picture_2.png, NZDUSD Rebound to Accelerate on Job Growth, Rate Hike Bets

Chart - Created Using FXCM Marketscope 2.0

  • Retains Upward Trend from 2009; Bullish RSI Break Highlights Topside Targets
  • Interim Resistance: 0.8430 (23.6% retracement) to 0.8465 (38.2% expansion)
  • Interim Support: 0.8030 (61.8% retracement) to 0.8050 Pivot

Impact that New Zealand Employment has had on NZDDuring the Last Release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

3Q 2013

11/05/2013 21:45 GMT

0.5%

1.2%

+33

+48

3Q 2013 New Zealand Employment

Forex_NZDUSD_Rebound_to_Accelerate_on_Job_Growth_Rate_Hike_Bets_body_ScreenShot042.png, NZDUSD Rebound to Accelerate on Job Growth, Rate Hike Bets

New Zealand Employment increased another 1.2% in the second-quarter, with the jobless rate narrowing to 6.2% from 6.4%, and the stronger-than-expected recovery may lead the RBNZ to adopt a more hawkish tone for monetary policy as it raises the threat of an asset-bubble. The New Zealand dollar tracked higher following the print, with the NZDUSD climbing above the 0.8350 region, and the higher-yielding currency continued to gain ground throughout the day as the pair closed at 0.8575.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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