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Dismal New Zealand Employment Report to Open Downside NZD/USD Targets

Dismal New Zealand Employment Report to Open Downside NZD/USD Targets

2016-05-03 18:15:00
David Song, Strategist
Share:

- New Zealand Employment to Expand Annualized 1.3% for Second Straight Quarter.

- Private Wages ex. Overtime to Increase 0.3%- Slowest Pace of Growth Since 1Q 2015.

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Trading the News: New Zealand Employment Change

Despite forecasts for another 1.3% expansion in New Zealand Employment, a pickup in the jobless rate may drag on the New Zealand dollar and spark a bearish reaction in NZD/USD as in dampens the outlook for growth and inflation.

What’s Expected:

DailyFX Calendar

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Why Is This Event Important:

Higher unemployment accompanied by signs of subdued wage growth may encourage the Reserve Bank of New Zealand (RBNZ) to further embark on its easing cycle especially as Governor Graeme Wheeler retains a cautious outlook for the region and keeps the door open to implement lower borrowing-costs.

Expectations: Bearish Argument/Scenario

Release

Expected

Actual

Trade Balance (MAR)

401M

117M

Credit Card Spending (MoM) (MAR)

--

-1.1%

Retail Sales ex Inflation (QoQ) (4Q)

1.5%

1.2%

Waning demand from home and abroad may prompt New Zealand firms to scale back on hiring, and a dismal employment report is likely to trigger a bearish reaction in NZD/USD as market participants boost bets for another RBNZ rate-cut in 2016.

Risk: Bullish Argument/Scenario

Release

Expected

Actual

ANZ Business Confidence (APR)

--

6.2.

REINZ House Sales (YoY) (MAR)

--

8.2%

Gross Domestic Product (YoY) (4Q)

2.1%

2.3%

Nevertheless, the rebound in business confidence accompanied by signs of a stronger-than-expected recovery may generate a positive development, and an improvement in labor-market dynamics may heighten the appeal of the New Zealand dollar as global investors scale back expectations for additional monetary support.

How To Trade This Event Risk(Video)

Bearish NZD Trade: Jobless Rate Rises, Wage Growth Slows

  • Need red, five-minute candle following the report for a potential short NZD/USD trade.
  • If market reaction favors a bearish kiwi trade, sell NZD/USD with two separate position.
  • Set stop at the near-by swing high/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.

Bullish NZD Trade: Employment Report Exceeds Market Expectations

  • Need green, five-minute candle to consider a long NZD/USD position.
  • Carry out the same setup as the bearish kiwi trade, just in reverse.

Potential Price Targets For The Release

NZD/USD Daily

NZD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The failed attempt to break above the April high (0.7053) raises the risk for a near-term top in NZD/USD especially as the Relative Strength Index (RSI) appears to be carving a bearish formation.
  • Interim Resistance: 0.7050 (78.6% retracement) to 0.7070 (23.6% expansion)
  • Interim Support: 0.6400 (61.8% retracement) to 0.6440 (23.6% retracement)

Check out the short-term technical levels that matter for NZD/USDheading into the report!

Avoid the pitfalls of trading by steering clear of classic mistakes. Review these principles in the "Traits of Successful Traders" series.

Impact that the New Zealand Employment report 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)

4Q 2015

02/02/2016 20:45 GMT

1.1%

1.3%

+169

+140

4Q 2015New Zealand Employment

NZD/USD Chart

New Zealand Employment increased an annualized 1.3% during the last three-months of 2015, with the jobless rate unexpectedly narrowing to 5.3% from 6.0% during the same period amid forecasts for a 6.1% print. At the same time, the Participation rate narrowed to 68.4.% from a revised 68.7% in the third-quarter, while Private Wages excluding Overtime increased another 0.4% amid projections for a 0.5% clip. Despite the mixed figures, the New Zealand dollar gained ground following the report, with NZD/USD climbing above the 0.6550 zone to end the day at 0.6660.

Get our top trading opportunities of 2016 HERE

Read More:

SPX500 Technical Analysis: At Support, but Beware the Monthly Doji

China’s Market News: Earnings Reports Reveal Government Purchases

EUR/USD Testing Neckline of Major Double Bottom Pattern

USD/JPY Technical Analysis: Signs of Hope for JPY Bears?

--- 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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