The New Zealand dollar is almost unchanged in the Tuesday session. Currently, NZD/USD is trading at 0.7151, down 0.08% on the day.
Will job data wake up sleepy kiwi?
NZD/USD has been drifting since last week, as the pair trades comfortably around the 0.715 level. However, the calm waters could become more agitated later in the day, as New Zealand releases Employment Change (21:45 GMT). Like many other tier-1 events, this release is published each quarter, which makes these events significant market-movers.
New Zealand has done an excellent job in containing Covid, but the swift and effective lockdowns have come with a significant economic price. Job creation has declined in the last two quarters, with a dismal reading of -0.8% in Q4 of 2020. The markets are expecting better news for the first quarter, with an estimate of 0.1%. A figure below this small gain could sour investors and send NZD/USD to lower levels. The unemployment rate has also pointed to trouble in the labor market. The rate surged to 5.3% in Q4, up from 4.0% beforehand. This marked the highest jobless rate since 2016. The sharp rise in unemployment is expected to continue, with a forecast of 5.6% for the first quarter.
Annual inflation in 2020 was 1.7%, which is in the lower part of the RBNZ’s inflation target range of 1-3 per cent. What is significant about inflation remaining on the lower side of the range is that there are no inflationary pressures on the central bank to lower interest rates anytime soon. At the same time, New Zealand’s economy has largely recovered to its pre-pandemic levels, and the New Zealand dollar has shown marked appreciation against the US dollar in recent months. Given that the RBNZ will likely be less inclined to lower rates in 2021, this provides more scope for the New Zealand dollar to continue to rise.
- NZD/USD faces resistance at 0.7251. This is followed by resistance at 0.7321
- There is support at 0.7109. Below, we find support at 0.7037
- The pair is putting downward pressure on the 50-day moving average (MA) at 0.7117. A daily close below this line would be a bearish technical signal