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Strong Employment Results Help NZD Crash Already Weakened USD

Nov, 02nd 10:58
nzdusd rates

New Zealand dollar soared to the highest in nearly two weeks on Wednesday after data of a tightening local labor market magnified Kiwi’s strength against an already weak U.S dollar. The pair extended its gains for the second day amid uncertainties related to the outcome of the US election.

The Kiwi has surged nearly 1% since the Statistics New Zealand reported the country’s jobless rate unexpectedly fell to the lowest level since 2008. New Zealand’s unemployment rate fell to a seasonally adjusted 4.9% in three months to September, from 5.1% in the preceding quarter. Meanwhile, employment grew 6.1% on a yearly basis and 1.4% quarter-on-quarter, beating expectations calling for a growth rate of 5.4% y/y and the 0.5% q/q/.

According to the report, more New Zealanders entered the labor force last quarter, which pushed the participation rate up to 70.1% versus the 69.7% expected and 69.7% recorded in in April-June period. Fortunately, the number of people employed in NZ outpaced the number of people entering the workforce. Employment rose 1.4% from the second quarter, following an increase at the pace of 2.4% in the second quarter.

With strong data today, investors expected the Reserve Bank of New Zealand will deliver a less dovish stance in next week’s policy decision.

Meanwhile, in spite of rising expectations that the U.S Federal Reserve may increase rate by the year’s end, the greenback could not sustain its bullish sentiment. The U.S. dollar has weakened since the Federal Bureau of Investigation on Friday announced that it had reopened a probe of Clinton’s misuse of private e-mail while Secretary of State.

The investigation was reopened just days before the presidential election on November 08th. Taking advantages of decreasing enthusiasm among Clinton supporters, Republican nominee Donald Trump has overtaken Clinton in polls for the first time since May. The resurgence of Trump has triggered a sell-off in global stock markets where investors generally view Clinton as the more market-friendly candidate.

Today, all eyes will be on the U.S. Federal Reserve that is forecast to leave interest rates unchanged and offer guidance to the timing of the next rate hike.


Fig: NZDUSD H4 Technical Chart

The New Zealand dollar has rocketed since it breached the 23.6% Fibonacci level at 0.71618. The short-term MA20 has crossed over the long-term MA50 from below earlier today, supporting for the uptrend. With ADX surging to as high as 44.97, the upmoves are expected to extend. But the rally seems limited as the RSI has entered the overbought zone. The pair may find its resistance at the major level 0.73000.

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