NZD/USD – Trading the New Zealand Employment Data

Did New Zealand recover from the earthquake? The upcoming employment figures will provide an answer and a direction for NZD/USD. Here are the details and 5 possible scenarios.

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New Zealand is unique in publishing its employment data only once per quarter. These figures, important in any country, are magnified by the frequency.  Q4 was terrible – the employment change figure showed a loss of 0.5%, while a gain of 0.2% was expected. Also the unemployment rate leaped from 6.4% to 6.8%, worse than expected.

The recent earthquake in Christchurch happened during the first quarter. The economy was hit by the quake and the central bank cut the interest rate by 0.5% in an immediate move.

On the other hand, the prices of various food products that New Zealand exports have risen significantly in the first quarter, pushing the economy forward.

The big question is: Which force had a stronger impact on the economy? Expectations are slightly optimistic. The first quarter of 2011 is expected to see a gain of 0.6% jobs and a slide of the unemployment rate to 6.7%.

Sentiment and Technical Levels

The sentiment is clearly bullish on NZD/USD. The US dollar was seriously hit by the recent rate decision in the US, containing a decision on QE2 Lite. Regarding the kiwi, rising commodity prices helped it move forward. The result was a break to the highest levels since the crisis began.

Technical levels, from top to bottom: 83, 82.15, 81, 79.75, 78.75, 78.25.

5  Scenarios:

1. Within expectations: A gain of 0.4% to 0.7% in jobs and an unemployment rate of 6.5% to 6.7% – NZD/USD continues higher, with a small chance of breaking the next resistance level.
2. Above expectations: A gain of 0.8% to 1% in jobs, and a drop in the unemployment rate to 6.2% – 6.4% – NZD/USD rises with an excellent chance of breaking above resistance.
3. Well above expectations: A gain of 1.1% or more in jobs and a drop in the unemployment rate to 6.1% or less. NZD/USD has a good chance of reaching historic highs.
4. Below expectations: A gain of 0.1% to 0.3% in jobs and an unemployment rate of 6.8% to 6.9%. NZD/USD drops with a small chance of losing support.
5. Well below expectations: No change or a drop in jobs and an unemployment rate of over 7% (a psychological barrier). NZD/USD falls, loses support and approaches the next line of support.

For more events and technical analysis, see the NZD/USD Forecast.