The AUDNZD is trading higher today on the back of the weak employment numbers from New Zealand. New Zealand’s October employment change came in at 0.2% as expected, but unemployment rate rose to 4.2% as against the market expectation of 4.1%.
This data release confirms the weak forecasts for employment growth in the third quarter, with a drop in annualized employment growth from 1.4% to 0.9%.
The Reserve Bank of New Zealand now has a mandate to boost employment. It is therefore expected that the RBNZ will factor the latest unemployment rate figures into its monetary policy statement to be released Wednesday next week.
Technical Outlook for AUDNZD
The response of the AUDNZD is in keeping with my analysis of yesterday, which identified the divergent fundamentals as being responsible for the uptrending price action. Labour market conditions in New Zealand are currently lagging behind economic activity. Domestic growth is also not expected to recover sharply, which is at variance with the robust outlook provided by the RBA in its rate statement earlier in the week.
The AUDNZD has extended its gains and this could continue well into next week. However, markets will also be watching the monetary policy outlook of the RBA on Friday to see if the document supports further upside or not.
The AUDNZD is currently trading at 1.0820, which is a few pips below the R1 pivot for the day (1.0834). However, this is close to the upper barrier of the range shown on the daily chart. A break of 1.0834 could open the door for more upside to 1.0862 – 1.0886 in the near term. Medium-term upside targets also lie at 1.09993 and 1.1169.
To the downside, 1.07152 and 1.0646 also present long-term targets, but would require a change in sentiment to be attained as bias is tilted to the bullish end at this time.