NZD/USD to Eye 2016 High on Solid New Zealand Employment
- 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.
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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.
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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
|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
|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
- 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!
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Impact that the New Zealand Employment report has had on NZD/USD during the last release
|Period||Data Released||Estimate||Actual||Pips Change||Pips Change|
|05/03/2016 22:45 GMT||1.3%||2.0%||+10||-42|
1Q 2016 New Zealand Employment
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.
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--- Written by David Song, Currency Analyst
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