Couple of hours ago the quarterly unemployment numbers were released in New Zealand. The consensus was either 6.1% or 6.2%, depending on a forecast, but the in principle the expectation was a minor increase from the previous quarter’s figure of 6.0%. The actual number showed a sharp increase in unemployment, which jumped to 6.8%, surprising the markets. This is believed to create a new, and unexpected challenge to RBNZ policy strategy, putting a question mark on next interest rate increase, something that most market participants took for granted.
Just like on previous occasions, currencies reacted sharply, with the New Zealand dollar selling off quite a bit. These strong moves following unemployment reports have turned out to be a common theme for the commodity currencies lately. More interestingly, the economists and analysts do not seem to be able to predict labor data in Australia and New Zealand. Seems like every news release has a surprise big enough to create action. It remains to be seen just how accurate the consensus is for the USA NFP on Friday, but if another surprise is revealed, we might be in for a ride accross all currencies. BTW, the forecast is for 9.6% unemployment rate in US, compared to 9.5% before.
The Kiwi slumped against all currencies, following the announcement. Even the normally slow moving AUD-NZD had a strong move, about a 100 pips. Now we have to wait and see if there is a contunuation to it later on, or will this be ignored by the time Europe opens.
The Japanese Yen after some strength is coming under pressure again. On this chart of GBP-JPY the price is approaching recent resistance at 137.75. It would be nice to see a small pull back from that level followed by a breakout. Should this happen, a buy is possible there with about 130 pips or so objective. This chart also shows a support at 135.80. If the JPY reverses at the resistance and makes a run on these lows, a short trade might a good idea. Another of the JPY crosses, the AUD-JPY, shows a similar pattern, but on a 4H chart.
Yesterday couple of trades in the Canadian Dollar pairs were discussed. Since then the CAD appreciated, meaning that the EUR-CAD and GBP-CAD sold off. There may be some buying opportunities on Thursday.
Mike K.
[...] No doubt, it was the most anticipated event on the calendar this week, especially considering that all other employment news recently have been surprising. On the negative side, no less. Of particular interest was the correlation between the NFP and the [...]
[...] The Beast was discussed yesterday. It was nice to see that support at 135.80 held, creating an easy to see breakout possibility. Both long and short trades are considered on moves outside this fairly wide congestion. I expect something to happen before the weekend. [...]
[...] reponse to weak employment data recently, many currency pairs contracted into trading ranges. The global recovery is in question and [...]