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New Zealand Dollar: NZD/USD & NZD/JPY Eye Employment Data

New Zealand Dollar: NZD/USD & NZD/JPY Eye Employment Data

2020-02-04 19:10:00
Rich Dvorak, Junior Analyst
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NZD/USD & NZD/JPY OUTLOOK: NEW ZEALAND DOLLAR TURNS TO 4Q EMPLOYMENT CHANGE & UNEMPLOYMENT RATE

  • New Zealand Dollar outlook hinges largely on upcoming employment change and unemployment rate data due for release Tuesday at 21:45 GMT
  • NZD/USD and NZD/JPY overnight implied volatility measures jump ahead of high-impact New Zealand Jobs data owing to the potential impact it may have on RBNZ monetary policy
  • The Kiwi took a nosedive last month with NZD/USD and NZD/JPY down 4.5% and 4.9% respectively since the New Zealand Dollar printed its recent peak

NZD price action will likely be front and center during Tuesday’s afternoon trading session with New Zealand employment data on tap for release at 21:45 GMT. The New Zealand Dollar has dropped well over 4% so far this year, largely in response to a flood of risk aversion, but the Kiwi now looks to quarterly jobs data for a fundamental catalyst to spark the next major move in NZD/USD and NZD/JPY.

CHART OF NEW ZEALAND EMPLOYMENT CHANGE, UNEMPLOYMENT RATE & INFLATION

New Zealand Dollar NZ Employment Chart Historical Data

New Zealand employment change figures for 4Q-2019 are expected to cross the wires at 1.2% year-over-year, which would be an acceleration from the 0.9% rise over the prior period. The New Zealand unemployment rate is expected to remain steady at 4.2%.

Another uptick in New Zealand unemployment or slowdown in employment growth could weigh negatively on NZD/USD and NZD/JPY as it would likely encourage the Reserve Bank of New Zealand (RBNZ) to reiterate its accommodative monetary policy stance.

CHART OF RBNZ INTEREST RATE CHANGE PROBABILITIES

RBNZ Reserve Bank of New Zealand Interest Rate Change Probabilities

I noted two weeks back that New Zealand Dollar outlook could lack enthusiasm with inflation remaining below the RBNZ 2% target midpoint and boosting inflation might remain an obstacle if employment data softens. That said, markets are expecting roughly 19-bps of interest rate cuts by the September 2020 RBNZ meeting according to the latest overnight swaps pricing.

NZD/USD PRICE CHART: DAILY TIME FRAME (SEPTEMBER 2019 TO FEBRUARY 2020)

NZDUSD Price Chart New Zealand Dollar

NZD/USD overnight implied volatility jumped to a 7-week high ahead of heavy-hitting New Zealand employment data on deck for release.

Technical resistance for spot NZD/USD appears to reside near the 0.6500 handle, which roughly aligns with its 200-day simple moving average and upper bound of its 1-standard deviation trading range derived from its overnight implied volatility reading of 9.87%.

NZD/USD MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 15% 17% 16%
Weekly 6% -20% -3%
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Downside in spot NZD/USD price action could be contained by technical support provided by the lower bound of its options-implied trading range and area of confluence around the 0.6435 mark.

NZD/JPY PRICE CHART: DAILY TIME FRAME (AUGUST 2019 TO FEBRUARY 2020)

NZDJPY Price Chart New Zealand Dollar

NZD/JPY has surged off the 70.000 handle, its 200-day SMA as well as its broader uptrend support line extended through the August and October lows. Spot NZD/JPY is estimated to range between 70.524-71.440 with a 68% statistical probability judging by its overnight implied volatility reading of 10.46%.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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