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Strong New Zealand Employment Report to Keep NZD/USD Afloat

Strong New Zealand Employment Report to Keep NZD/USD Afloat

2015-11-03 19:50:00
David Song, Shuyang Ren,
Share:

- New Zealand Employment to Expand for Twelve-Consecutive Quarters.

- Jobless Rate to Increase to Annualized 6.0%- Highest Since 1Q 2014.

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

Trading the News: New Zealand Employment Change

Despite forecasts for an uptick in the jobless rate, another pickup in New Zealand Employment accompanied by a further expansion in the Participation Rate may trigger a near-term rebound in NZD/USD as it limits the Reserve Bank of New Zealand’s (RBNZ) scope to further embark on its easing cycle.

What’s Expected:

NZD/USD New Zealand Employment

Click Here for the DailyFX Calendar

Why Is This Event Important:

With labor-force participation near record-highs, stronger job growth may keep the RBNZ on the sidelines throughout 2015 as it highlights an improved outlook for growth and inflation.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

ANZ Business Confidence (OCT)

--

10.5

Performance Service Index (SEP)

--

59.3

Purchasing Manager Index- Manufacturing (SEP)

--

55.4

Improved confidence accompanied by expansion in private-sector activity may stronger-than-expected employment report, and a further improvement in the labor market may heighten the appeal of the kiwi as market participants scale back bets for lower borrowing-costs.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Building Permits (MoM) (SEP)

--

-5.7%

Trade Balance (SEP)

-825M

-1222M

Gross Domestic Product (YoY) (2Q)

2.5%

2.4%

However, efforts to cool the housing market along with the slowdown in global trade may drag on job growth, and a dismal development may push the New Zealand dollar to give back the rebound from back in September as it fuels bets for another RBNZ rate cut.

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

  • Ongoing closes above 0.6690 (161.8% expansion) to 0.6710 (50% retracement) may continue to foster range-bound prices in NZD/USD; need to see the Relative Strength Index (RSI) break down from the bullish formation dating back to July to see a resumption of the long-term downward trend in the exchange rate.
  • DailyFX Speculative Sentiment Index (SSI) shows the retail crowd has flipped back to net-long NZD/USD today as the ratio advances to +1.02, with 50% of traders long.
  • Interim Resistance: 0.6890 (50% expansion) to 0.6900 (100% expansion)
  • Interim Support: 0.6400 (61.8% retracement) to 0.6440 (23.6% retracement)

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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)

2Q 2015

08/04/2015 22:45 GMT

0.5%

0.3%

-7

-13

2Q 2015 New Zealand Employment Change

NZD/USD Chart

New Zealand Employment merely increased 0.3% during the three-months through June following a revised 0.6% expansion in the first quarter, while the Unemployment Rate climbed to a 12-month high of 5.9% during the same period. The slowdown in job growth may encourage the Reserve Bank of New Zealand (RBNZ) to further embark on its easing cycle as Governor Graeme Wheeler continues to endorse a dovish outlook for monetary policy. The New Zealand dollar struggled following the worse-than-expected prints, with NZD/USD pulling back from the 0.6550 region to close the Asian Pacific trade at 0.6527.

--- 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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