NZD/USD – Kiwi Jumps as NZ Jobless Rate Tumbles

NZD/USD has posted strong gains on Wednesday, as the pair is trading at the 0.66 level in the European session. In economic news, New Zealand’s Unemployment rate fell sharply to 5.3%. Employment Change posted a gain of 0.9%, within expectations. Later in the day, RBNZ Assistant Governor John McDermott will deliver a speech in Sydney. In the US, there are two major events on the schedule, ADP Nonfarm Employment Change and ISM Non-Manufacturing PMI.

The kiwi has climbed 100 points on Wednesday, responding to excellent job numbers. The unemployment rate plunged to 5.3% in the fourth quarter, compared to 6.0% in the previous quarter. This was the lowest jobless rate since March 2009. Employment Change also looked sharp, bouncing back in Q4 with a strong gain of 0.9%, edging above the estimate of 0.8%. The New Zealand dollar endured a dreadful month of January, losing close to 400 points against its US counterpart. The New Zealand economy has been badly hit by the Chinese slowdown, as the Asian giant is New Zealand’s second largest trade partner. Chinese indicators have painted a grim picture, as GDP continues to edge lower and recent manufacturing PMIs have pointed to a slowdown in the Chinese manufacturing sector, resulting in lower demand for New Zealand exports.

A robust US labor market in the second half of 2015 helped convince the Federal Reserve to raise interest rates in December, but employment numbers have been lukewarm in early 2016. Next up is ADP Nonfarm Employment Change, with the official Nonfarm Payrolls report to follow on Friday. The markets are braced for a weak ADP report, with the estimate standing at just 193 thousand for January, compared to 257 thousand a month earlier. If the indicator does indeed slip badly, traders can expect the dollar to take a hit during the North American session. Employment numbers will be closely monitored by the Fed, which will have to decide if the economy is ready for another rate hike in March. In the heady days following the Fed’s historic rate hike, there was talk of up to four rate hikes in 2016, but this appears unlikely, given current economic conditions and the collapse of oil prices.

Tuesday (Feb. 2)

• 16:45 New Zealand Employment Change. Estimate 0.8%. Actual 0.9%
• 16:45 New Zealand Unemployment Rate. Estimate 6.1%. Actual 5.3%

Wednesday (Feb. 3)

• 8:15 US ADP Nonfarm Employment Change. Estimate 193K
• 9:45 US Final Services PMI. Estimate 53.7 points
• 10:00 US ISM Non-Manufacturing PMI. Estimate 55.1 points
• 10:30 US Crude Oil Inventories. Estimate 3.7M
• 17:30 RBNZ Assistant Governor John McDermott Speaks

Upcoming Key Events

Thursday (Feb. 4)

• 8:30 US Unemployment Claims. Estimate 279K

*Key releases are highlighted in bold

*All release times are EST

NZD/USD for Wednesday, February 3, 2016

NZD/USD February 3 at 7:20 EST

Open: 0.6514 Low: 0.6502 High: 0.6609 Close: 0.6603

NZD/USD Technical

• NZD/USD has shown steady upward movement in the Asian and European sessions
• 0.6605 is under strong pressure in resistance and could break during the day. 0.6738 is the next resistance line
• 0.6449 has strengthened in support as the pair trades at higher levels

Further levels in both directions:

• Below: 0.6449, 0.6344, 0.6233 and 0.6152
• Above: 0.6605, 0.6738 and 0.6897

OANDA’s Open Positions Ratio

The NZD/USD ratio is showing little change. Short positions have a slight majority (53%), indicative of trader bias towards the pair reversing directions and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.