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NZD/USD Rebound to Benefit from Strong NZ Employment- 0.7600 in Focus

NZD/USD Rebound to Benefit from Strong NZ Employment- 0.7600 in Focus

David Song, Shuyang Ren,

- New Zealand Employment to Expand for Nine Consecutive Quarters.

- Jobless Rate to Narrow to Annualized 5.3%- Lowest Since 1Q 2009.

For more updates, sign up for David's e-mail distribution list.

Trading the News: New Zealand Employment Change

Another 0.8% expansion in New Zealand Employment may encourage a more meaningful rebound in NZD/USD as it raises the outlook for growth and inflation.

What’s Expected:

NZD/USD Employment

Click Here for the DailyFX Calendar

Why Is This Event Important:

As a result, the Reserve Bank of New Zealand’s (RBNZ) may have little choice but to retain its current policy over the near to medium-term, and Governor Graeme Wheeler may show a greater willingness to further normalize monetary policy later this year as the economic recovery gathers pace.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

NZIER Business Opinion Survey (4Q)

--

23

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

0.7%

1.0%

Retail Sales ex Inflation (QoQ) (3Q)

0.8%

1.5%

Improved business confidence along with the expansion in private consumption may encourage a larger-than-expected rise in New Zealand employment, and an positive labor report may heighten the appeal of the kiwi as market participants scale back bets for a rate cut.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Building Permits (MoM) (DEC)

--

-2.1%

Home Loans (MoM) (NOV)

1.7%

-0.7%

Manufacturing Activity s.a. (QoQ) (3Q)

--

-1.2%

However, lower outputs pairs with the slowdown in building activity may drag on hiring, and a dismal development may spark another selloff in NZD/USD as spurs increased bets for lower borrowing-costs in New Zealand.

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How To Trade This Event Risk(Video)

Bullish NZD Trade: New Zealand Job Growth Exceeds Market Expectations

  • Need green, five-minute candle following the rate decision for a potential long NZD/USD trade
  • If market reaction favors a long kiwi trade, buy NZD/USD with two separate position
  • Set stop at the near-by swing low/reasonable distance from entry; look for 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: Employment Report Disappoints

  • Need red, five-minute candle to consider a short NZD/USD position
  • Carry out the same setup as the bullish kiwi trade, just in reverse

Read More:

GBPUSD - Working On A Bottom At Major Support

Price & Time: Gold Advance Resuming?

Potential Price Targets For The Release

NZD/USD Daily

NZD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Will watch former support regions for new resistance as the Relative Strength Index (RSI) comes off of oversold territory.
  • Interim Resistance: 0.7600 (38.2% expansion) to 0.7620 (61.8% retracement)
  • Interim Support: 0.7175 (Feb. low) to 0.7150 (78.6% expansion)

Impact that New Zealand Employment has had on NZD during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

3Q 2014

11/04/2014 21:45 GMT

0.6%

0.8%

+12

+15

3Q 2014 New Zealand Employment Change

NZD/USD Chart

New Zealand employment unexpectedly grew 0.8% in the third quarter after expanding 0.4% during the three-months through June, while the jobless rate narrowed to an annualized 5.4% to mark the lowest price since March 2009. The ongoing improvement in the labor market may push the Reserve Bank of New Zealand (RBNZ) to further normalize monetary policy, but it seems as though Governor Graeme Wheeler will continue to implement the verbal intervention on the local currency in an effort to boost the terms of trade. Nevertheless, the New Zealand dollar strengthened following the better-than-expected prints, with NZD/USD climbing above the 0.7750 region, but the market reaction failed to materialize throughout the day as the pair closed at 0.7733.

--- Written by David Song, Currency Analyst and Shuyang Ren

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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