Data from the Statistics Bureau of New Zealand showed that the unemployment rate dropped to 4.0% in the second quarter. This was significantly better than the 5.8% increase that analysts were expecting. It was also better than the previous 4.2%. The fall of unemployment rate during a pandemic is likely a surprise, but it was mostly because people in New Zealand were not looking for work during the initial part of the lockdown.
The NZDUSD also reacted to falling wages. According to the bureau, the labour cost index rose by 0.2% in the second quarter. That was a decline from the previous increase of 0.3% and the lowest pace of growth since 1994. On an annualised basis, the labour cost index rose by 1.8%, slightly lower than the 1.9% that analysts were expecting. Importantly, the wage growth happened even after the government increased the minimum wage in April.
Meanwhile, the participation rate declined from the previous 70.50% to 69.70% in the quarter. This was slightly worse than the 69.80% that analysts were expecting.
In all, the employment situation in New Zealand is relatively better than in most countries. For example, in the upcoming nonfarm payrolls numbers, analysts expect that the US unemployment rate will fall to 10%.
NZDUSD technical outlook
Turning to the four-hour chart, we see that the NZDUSD pair has been attempting to stage a comeback after falling to 0.6573 yesterday. The price has just moved above the 50-day and 100-day exponential moving averages. Also, it is attempting to move into the previous channel that is shown in pink. The price has also formed a double bottom pattern. Therefore, I expect that the upward trend will continue as bulls attempt to move back to the channel.
On the flip side, a move below 0.6573, which is yesterday’s low will invalidate this recovery trade. It will send a signal that there are more bears in the market, who will be keen to push the NZDUSD pair to 0.6500.