NZDUSD: Lower Unemployment Enough to Keep RBNZ from Cutting Rates Next Week?
Late last night the mixed employment report from New Zealand caused some volatility on NZDUSD. The currency pair spiked 20 pips to an intraday high of 0.6500 but quickly pared its gains. By the end of the New York session, NZDUSD had settled at 0.6487, up 27 pips from its opening price.
According to Statistics New Zealand, job growth for the fourth quarter of 2019 was flat. The expectation was for a 0.3% uptick to follow the 0.2% growth for Q3 2019. Digging deeper into the report, I also saw that the participation rate clocked in lower at 70.1% from 70.4% in Q3. This means that there were fewer people who actively looked for jobs in the said period.
On the brighter side of things, however, the unemployment rate came in lower at 4.0% than the consensus at 4.2%. The reading for the third quarter was also revised lower to 4.1% from initially being reported at 4.2%. According to some analysts, despite zero job growth, the downtick in unemployment rate is enough for the RBNZ not to cut rates next Wednesday. Currently, the central bank official cash rate is at 1.00%.
On the daily time frame of NZDUSD, we can see that the sell-off stopped at the 100 SMA. There were enough buyers in yesterday’s trading around 0.6450. Does this mean that we would soon see NZDUSD trade higher, possibly to its December 2019 highs at 0.6754?
Buyers will need to overcome the confluence of resistance around 0.6565. For one, this price coincides with the 38.2% Fib level when you draw the Fibonacci retracement tool from the high of December 31 to yesterday’s low. It also coincides with a previous trend line. When you connect the lows of October 1, October 16, and November 12, you will see that NZDUSD has fallen below trend line support. In forex trading, it’s not uncommon for previous support levels to turn into resistance.
However, if sellers dominate today’s trading, a close below yesterday’s low at 0.6447 could indicate a bigger sell-off on NZDUSD. It could then drop to its November 2019 lows at 0.6325.More content