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NZD/USD Rebound to Fizzle on Soft New Zealand Employment Report

NZD/USD Rebound to Fizzle on Soft New Zealand Employment Report

2017-05-02 15:30:00
David Song, Strategist
Share:

- New Zealand Employment Growth to Slow for Second Straight Quarter.

- Average Hourly Earnings to Rebound After Contracting for First Time Since 2008.

Trading the News: New Zealand Employment

New Zealand Employment

New Zealand’s 4Q Employment report may generate a mixed market reaction as job growth is projected to slow for the second consecutive quarter, but signs of stronger job growth may fuel the near-term rebound in NZD/USD as it dampens bets for additional monetary support.

Why Is This Event Important:

A pickup in household earnings may encourage Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler to alter the monetary policy outlook ahead of his departure in September as the central bank head anticipates inflation ‘to return to the midpoint of the target band over the medium term.’ However, another batch of lackluster data may force the RBNZ to preserve the record-low cash rate throughout 2017, and Governor Wheeler may continue to discourage bets for an imminent rate-hike as the ‘growth outlook remains positive, supported by on-going accommodative monetary policy.’

Have a question about the currency markets? Join a Trading Q&A webinar and ask it live!

Impact that the New Zealand Employment report has had on NZD/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

4Q

2016

01/31/2017 21:45 GMT

6.1%

5.8%

-44

-103

4Q 2016 New Zealand Employment

NZD/USD 15-Minute

NZD/USD Chart

New Zealand Employment increased 5.8% per annum during the last three-months of 2016, while the jobless rate unexpectedly climbed to an annualized 5.2% from 4.9% in the previous quarter as the labor force participation rate widened to 70.5% from 70.1% during the same period. At the same time, private wages excluding overtime increased another 0.4% amid forecasts for a 0.5% print, while average hourly earnings declined 0.3% in the fourth quarter to mark the first decline since 2008. The New Zealand dollar lost ground following the dismal report, with NZD/USD slipping below the 0.7300 handle to end the day at 0.7241.

How To Trade This Event Risk(Video)

Bearish NZD Trade: Job/Wage Growth Continues to Slow

  • Need a red, five-minute candle following the release to consider a short NZD/USD trade.
  • If market reaction favors a bearish kiwi position, sell NZD/USD with two separate lots.
  • 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: New Zealand Employment Exceeds Market Forecast

  • Need a green, five-minute candle to favor a long kiwi position.
  • Carry out the same setup as the bearish NZD trade, just in the opposite direction.

Potential Price Targets For The Release

NZD/USD Daily

NZD/USD Daily Chart

Chart - Created Using Trading View

  • Broader outlook for NZD/USD remains tilted to the downside as price and the Relative Strength Index (RSI) preserve the bearish formations carried over from the previous year, but the rebound from the 2017-low (0.6846) may gather pace over the days ahead as the momentum indicator highlights a near-term divergence and turns around ahead of oversold territory; first topside hurdle comes in around 0.6950 (38.2% retracement) to 0.6980 (23.6% expansion) followed by 0.7040 (50% retracement).
  • Interim Resistance: 0.7200 (38.2% retracement) to 0.7240 (61.8% retracement)
  • Interim Support: 0.6820 (23.6% retracement) to 0.6850 (38.2% retracement)

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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