NZD/USD: Trading the New Zealand Employment May 2013

The New Zealand Employment Change indicator is an important leading indicator which often has a significant impact on the markets. Employment Change is released together with the Unemployment Rate. A reading which is better than the market forecast is bullish for the New Zealand dollar.

Here are the details and 5 possible outcomes for NZD/USD.

Published on Wednesday at 22:45 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. The release of the employment change indicator is highly anticipated by the markets, and can have a significant impact on the movement of NZD/USD.

Employment Change has posted declines for the past three quarters, pointing to weakness in the employment market. However, the markets are anticipating a much better reading for Q1, with an estimate of 1.1%.  The previous reading came in at a disappointing 0.2% increase, well below the market forecast of 0.5%.  The markets are  expecting an improvement, with a February forecast of 0.4%. Will the indicator be able to meet or beat the market’s prediction?

Sentiment and Levels

New Zealand benchmark interest is at 2.50%, helping make the kiwi attractive to investors. New Zealand posted some strong numbers in April – the trade surplus easily beat the estimate, and the Manufacturing Index was solid.  So, the overall sentiment is bullish on NZD/USD towards this release.

Technical levels from top to bottom: 0.90, 0.8842,, 0.8470, 0.8360, 81.75 and 0.81.

5 Scenarios

1. Within expectations: 0.8% to 1.4%: In this scenario, NZD/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
2. Above expectations: 1.5% to 1.8%: A reading above expectations would be an indication of expansion in the economy, and could push the pair above one resistance level.
3. Well above expectations: Above 1.8%: A sharp rise in employment numbers could propel NZD/USD upwards, and two or more resistance lines could be broken.
4. Below expectations: 0.4% to 0.7%: A lower than expected reading could pull the pair downwards, with one support level at risk.
5. Well below expectations: Below 0.4%: A very poor reading will hurt confidence in the kiwi, and NZD/USD could break two or more support levels.

For more on the kiwi, see the NZD/USD.

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