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NZD/USD to Eye 2016 High on Solid New Zealand Employment

NZD/USD to Eye 2016 High on Solid New Zealand Employment

David Song, Strategist

- New Zealand Employment to Increase Annualized 2.3%- Fastest Pace of Growth Since 2Q 2015.

- Labor Force Participation Rate to Narrow for First Time Since 2Q 2015.

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

Trading the News: New Zealand Employment

A pickup in New Zealand Employment accompanied by a downtick in the jobless rate may foster fresh 2016-highs in NZD/USD as market participants scale back bets of seeing the Reserve Bank of New Zealand (RBNZ) deliver another rate-cut in September.

What’s Expected:

DailyFX Calendar

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Why Is This Event Important:With the benchmark interest rate sitting at a record-low of 2.00%, signs of a stronger-than-expected recovery may encourage the RBNZ to endorse a wait-and-see approach at the next policy meeting on September 22, but Governor Graeme Wheeler may keep the door open to implement lower borrowing-costs as the central bank warns ‘current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range.’

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Retail Sales ex Inflation (QoQ) (2Q)

1.0%

2.3%

Building Permits (MoM) (JUN)

--

16.3%

Gross Domestic Product s.a. (QoQ) (1Q)

0.5%

0.7%

The pickup in private-sector spending accompanied by the ongoing expansion in the housing market may encourage New Zealand firms to boost their labor force, and a marked expansion in job growth may ultimately fuel the near-term advance in NZD/USD as it undermines expectations for lower borrowing-costs.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Purchasing Manager Index- Manufacturing (JUL)

--

55.8

ANZ Business Confidence (JUL)

--

16.0

Trade Balance (JUN)

150M

127M

However, waning business confidence paired with the slowdown in global trade may drag on the labor market, and a dismal development may drag on the New Zealand dollar as it fuels bets for the RBNZ to implement back-to-back rate-cuts.

How To Trade This Event Risk(Video)

Bullish NZD Trade: 2Q Employment Expands 2.3% or Greater

  • Need green, five-minute candle following the data print to consider a long NZD/USD position.
  • If market reaction favors a bullish kiwi trade, buy NZD/USD with two separate position.
  • Set stop at the near-by swing low/reasonable distance from cost; at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is met, set reasonable limit.

Bearish NZD Trade: New Zealand Job Growth Falls Short of Market Expectations

  • Need red, five-minute candle to favor a short NZD/USD trade.
  • Implement same strategy as the bullish New Zealand dollar trade, just in reverse.

Potential Price Targets For The Release

NZD/USD Daily

NZD/USD Daily Chart
  • Broader outlook for NZD/USD remains constructive even after the RBNZ interest-rate decision as the pair preserves the bullish trend from late-May, while the Relative Strength Index (RSI) breaks out of the bearish formation carried over from June, but the pair may continue to consolidate with a wedge/triangle formation over the coming days amid the failed attempt to break/close above the Fibonacci overlap around 0.7330 (38.2% retracement) to 0.7340 (61.8% expansion).
  • Key Resistance: 0.7330 (38.2% retracement) to 0.7340 (61.8% expansion)
  • Key Support: 0.6950 (38.2% retracement) to 0.6980 (38.2% expansion)

Check out the short-term technical levels that matter for NZD/USD heading 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/USD during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

1Q

2016

05/03/2016 22:45 GMT

1.3%

2.0%

+10

-42

1Q 2016 New Zealand Employment

NZD/USD 5-Minute

NZD/USD Chart

New Zealand 1Q Employment increased an annualized 2.0% following a revised 1.0% expansion during the last three-months of 2015, while the jobless rate jumped to 5.7% from 5.0% as the Participation advanced to 69.0% from a revised 68.3%. Moreover, Private Wages excluding Overtime increased 0.4% in the first-quarter amid forecasts for a 0.3% print, while Average Hourly Earnings advanced 0.3% amid projections for a 0.5% clip. The initial move higher in NZD/USD was short-lived, with NZD/USD coming off of 0.6940 to end the day at 0.6875.

Get our top trading opportunities of 2016 HERE

Read More:

USD/CAD Technical Analysis: Macro Now Favoring a Breakdown?

Gold Prices Wedging into Consolidation Near Resistance

USDOLLAR Short Term Technical Update

S&P 500: Notches New Record High, Short-term Techs in Focus

--- 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.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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